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UNITED STATES

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 quarterly period ended July 11, 2020 or

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____ to _____

Commission File Number 0-6966

ESCALADE, INCORPORATED

(Exact name of registrant as specified in its charter)

Indiana

13-2739290

(State of incorporation)

(I.R.S. EIN)

817 Maxwell Ave, Evansville, Indiana

47711

(Address of principal executive office)

(Zip Code)

812-467-1358

(Registrant’s Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

  

Trading Symbol

  

Name of Exchange on which registered

Common Stock, No Par Value

ESCA

The NASDAQ Stock Market LLC

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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.       

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

    

Outstanding at July 31, 2020

Common, no par value

14,153,579

INDEX

 

 

Page
No.

 

 

 

Part I.

Financial Information:

 

 

 

Item 1 -

Financial Statements:

 

 

 

Consolidated Condensed Balance Sheets as of July 11, 2020, December 28, 2019, and July 13, 2019

3

 

 

 

Consolidated Condensed Statements of Operations for the Three Months and Six Months Ended July 11, 2020 and July 13, 2019

4

 

 

 

Consolidated Condensed Statements of Stockholders’ Equity for the Three Months and Six Months Ended July 11, 2020 and July 13, 2019

5

 

 

 

Consolidated Condensed Statements of Cash Flows for the Six Months Ended July 11, 2020 and July 13, 2019

6

 

 

 

Notes to Consolidated Condensed Financial Statements

7

 

 

 

Item 2 -

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

 

 

 

Item 3 -

Quantitative and Qualitative Disclosures About Market Risk

15

 

 

 

Item 4 -

Controls and Procedures

15

 

 

 

Part II.

Other Information

 

 

 

Item 2 -

Unregistered Sales of Equity Securities and Use of Proceeds

17

 

 

 

Item 6 -

Exhibits

19

 

 

 

Signature

20

2

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

    

July 11,

    

December 28,

    

July 13,

All Amounts in Thousands Except Share Information

2020

2019

2019

(Unaudited)

(Audited)

(Unaudited)

ASSETS

 

  

 

  

 

  

Current Assets:

 

  

 

  

 

  

Cash and cash equivalents

$

16,669

$

5,882

$

4,598

Receivables, less allowance of $728; $483; and $533; respectively

 

49,516

 

35,450

 

35,229

Inventories

 

41,653

 

42,269

 

47,984

Prepaid expenses

 

2,085

 

3,151

 

2,958

Prepaid income tax

 

 

163

 

1,687

TOTAL CURRENT ASSETS

 

109,923

 

86,915

 

92,456

 

 

  

 

Property, plant and equipment, net

 

14,713

 

15,111

 

15,387

Operating lease right-of-use assets

 

1,395

 

1,080

 

1,288

Intangible assets, net

 

18,071

 

18,847

 

19,529

Goodwill

 

26,749

 

26,749

 

26,749

Other assets

 

57

 

77

 

94

TOTAL ASSETS

$

170,908

$

148,779

$

155,503

 

  

 

  

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

 

  

Current Liabilities:

 

  

 

  

 

  

Note payable

$

$

135

$

135

Trade accounts payable

 

18,109

 

7,765

 

7,187

Accrued liabilities

 

13,196

 

9,689

 

7,732

Income tax payable

1,705

Current operating lease liabilities

 

711

 

621

 

694

TOTAL CURRENT LIABILITIES

 

33,721

 

18,210

 

15,748

 

  

 

  

 

  

Other Liabilities:

 

  

 

  

 

  

Long-term debt

 

 

 

7,393

Deferred income tax liability

 

3,537

 

3,537

 

3,409

Operating lease liabilities

 

699

 

475

 

616

Other liabilities

 

387

 

387

 

1,094

TOTAL LIABILITIES

 

38,344

 

22,609

 

28,260

 

  

 

  

 

  

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 outstanding14,153,579; 14,214,777; and 14,467,634; shares respectively

 

14,154

 

14,215

 

14,468

Retained earnings

 

118,410

 

111,955

 

112,775

TOTAL STOCKHOLDERS’ EQUITY

 

132,564

 

126,170

 

127,243

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

170,908

$

148,779

$

155,503

See notes to Consolidated Condensed Financial Statements.

3

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended

Six Months Ended

    

July 11,

    

July 13,

    

July 11,

    

July 13,

All Amounts in Thousands Except Per Share Data

2020

2019

2020

2019

Net sales

$

83,524

$

55,639

$

120,813

$

87,741

Costs and Expenses

 

 

 

 

Cost of products sold

 

60,289

 

42,680

 

87,363

 

66,305

Selling, administrative and general expenses

 

11,921

 

10,038

 

19,378

 

17,783

Amortization

 

442

 

450

 

776

 

788

Operating Income

 

10,872

 

2,471

 

13,296

 

2,865

Other Income (Expense)

 

 

 

 

Interest expense

 

(60)

 

(131)

 

(104)

 

(199)

Other income

 

22

 

3

 

68

 

9

Income Before Income Taxes

 

10,834

 

2,343

 

13,260

 

2,675

Provision for Income Taxes

 

2,124

 

467

 

2,599

 

532

Net Income

$

8,710

$

1,876

$

10,661

$

2,143

Earnings Per Share Data:

 

 

 

 

Basic earnings per share

$

0.62

$

0.13

$

0.76

$

0.15

Diluted earnings per share

$

0.61

$

0.13

$

0.75

$

0.15

Dividends declared

$

0.125

$

0.125

$

0.25

$

0.25

See notes to Consolidated Condensed Financial Statements.

4

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

Common Stock

Retained

All Amounts in Thousands

    

Shares

    

Amount

    

Earnings

    

Total

Balances at March 23, 2019

 

14,471

$

14,471

$

112,545

$

127,016

Net income

 

 

 

1,876

 

1,876

Expense of stock options and restricted stock units

 

 

 

197

 

197

Dividends declared

 

 

 

(1,809)

 

(1,809)

Purchase of stock

 

(12)

 

(12)

 

(127)

 

(139)

Stock issued to directors as compensation

9

9

93

102

Balances at July 13, 2019

 

14,468

$

14,468

$

112,775

$

127,243

Balances at December 29, 2018

 

14,439

$

14,439

$

113,882

$

128,321

Net income

 

 

 

2,143

 

2,143

Expense of stock options and restricted stock units

 

 

 

341

 

341

Exercise of stock options

10

10

108

118

Settlement of restricted stock units

 

25

 

25

 

(25)

 

Dividends declared

 

 

 

(3,618)

 

(3,618)

Purchase of stock

 

(15)

(15)

(149)

(164)

Stock issued to directors as compensation

 

9

9

93

102

Balances at July 13, 2019

 

14,468

$

14,468

$

112,775

$

127,243

Common Stock

Retained

All Amounts in Thousands

    

Shares

    

Amount

    

Earnings

    

Total

Balances at March 21, 2020

 

14,097

$

14,097

$

111,072

$

125,169

Net income

 

 

 

8,710

 

8,710

Expense of stock options and restricted stock units

 

 

 

357

 

357

Settlement of restricted stock units

12

12

(12)

Issuance of restricted stock awards

35

35

(35)

Dividends declared

 

 

 

(1,769)

 

(1,769)

Stock issued to directors as compensation

 

10

 

10

 

87

 

97

Balances at July 11, 2020

 

14,154

$

14,154

$

118,410

$

132,564

Balances at December 28, 2019

 

14,215

$

14,215

$

111,955

$

126,170

Net income

 

 

 

10,661

 

10,661

Expense of stock options and restricted stock units

 

 

 

493

 

493

Settlement of restricted stock units

 

36

 

36

 

(36)

 

Issuance of restricted stock awards

35

35

(35)

Dividends declared

 

 

 

(3,531)

 

(3,531)

Purchase of stock

 

(142)

 

(142)

 

(1,184)

 

(1,326)

Stock issued to directors as compensation

 

10

 

10

 

87

 

97

Balances at July 11, 2020

 

14,154

$

14,154

$

118,410

$

132,564

See notes to Consolidated Condensed Financial Statements.

5

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended

    

July 11,

    

July 13,

All Amounts in Thousands

2020

2019

Operating Activities:

 

  

 

  

Net income

$

10,661

$

2,143

Depreciation and amortization

 

2,234

 

2,266

Provision for doubtful accounts

325

259

Loss (gain) on disposal of property and equipment

(2)

6

Stock-based compensation

493

341

Adjustments necessary to reconcile net income to net cash provided by operating activities

 

3,029

 

(4,822)

Net cash provided by operating activities

 

16,740

 

193

Investing Activities:

 

 

Purchase of property and equipment

 

(1,061)

 

(1,377)

Acquisitions

(765)

Payment on note payable related to an acquisition

 

(135)

 

Proceeds from sale of property and equipment

3

4

Net cash used by investing activities

(1,193)

(2,138)

Financing Activities:

 

Proceeds from issuance of long-term debt

 

6,306

 

43,299

Payments on long-term debt

 

(6,306)

 

(35,906)

Proceeds from exercise of stock options

 

 

118

Deferred financing fees

 

 

(112)

Purchase of stock

 

(1,326)

 

(164)

Cash dividends paid

(3,531)

(3,618)

Director stock compensation

 

97

 

102

Net cash provided (used) by financing activities

(4,760)

3,719

Net increase in cash and cash equivalents

 

10,787

 

1,774

Cash and cash equivalents, beginning of period

 

5,882

 

2,824

Cash and cash equivalents, end of period

$

16,669

$

4,598

Non-Cash Transactions

Note payable for deferred purchase price obligation

$

$

135

See notes to Consolidated Condensed Financial Statements.

6

ESCALADE, INCORPORATED AND SUBSIDIARIES

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 28, 2019 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 2019 filed with the Securities and Exchange Commission.

Reclassifications - Certain reclassifications have been made to prior year financial statements to conform to the current year financial statement presentation. These reclassifications had no effect on net earnings.

Note B – Seasonal Aspects

The results of operations for the three and six month periods ended July 11, 2020 and July 13, 2019 are not necessarily indicative of the results to be expected for the full year.

Note C – Inventories

    

July 11,

    

December 28,

    

July 13,

In thousands

2020

2019

2019

Raw materials

$

6,222

$

3,186

$

4,329

Work in progress

 

3,297

 

2,177

 

2,729

Finished goods

 

32,134

 

36,906

 

40,926

$

41,653

$

42,269

$

47,984

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.

7

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 July 11, 2020, December 28, 2019 and July 13, 2019.

Fair Value Measurements Using

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

July 11, 2020

Carrying

for Identical

Observable Inputs

Inputs

In thousands

    

Amount

    

Assets (Level 1)

    

(Level 2)

    

(Level 3)

Financial assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

16,669

$

16,669

$

$

 

 

 

 

Fair Value Measurements Using

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

December 28, 2019

Carrying

for Identical

Observable Inputs

Inputs

In thousands

    

Amount

    

Assets (Level 1)

    

(Level 2)

    

(Level 3)

Financial assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

5,882

$

5,882

$

$

Fair Value Measurements Using

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

July 13, 2019

Carrying

for Identical

Observable Inputs

Inputs

In thousands

    

Amount

    

Assets (Level 1)

    

(Level 2)

    

(Level 3)

Financial assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

4,598

$

4,598

$

$

Financial liabilities

Long-term debt

$

7,393

$

$

7,393

$

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 six months ended July 11, 2020 and pursuant to the 2017 Incentive Plan, in lieu of cash payments of director fees, the Company awarded to certain directors 9,448 shares of common stock. During the six months ended July 11, 2020, the Company awarded 22,850 restricted stock units to directors, 113,669 restricted stock units and 35,000 shares of restricted stock 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. All of the 2020 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, and 18,268 of such restricted stock units are also subject to performance conditions. The 35,000 shares of restricted stock vest over three years (40% one year from grant, 30% two years from grant and 30% three years from grant) provided that the employee is still employed by the Company on the vesting date.

For the three and six months ended July 11, 2020, including expense associated with issuing certain directors stock in lieu of cash for certain director fees, the Company recognized stock based compensation expense of $454 thousand and $590 thousand, respectively compared to stock based compensation expense of $299 thousand and $443 thousand for the same periods in the prior year. At July 11, 2020 and July 13, 2019, respectively, there was $1.4 million and $1.0 million in unrecognized stock-based compensation expense related to non-vested stock awards.

8

Note F – Segment Information

For the Three Months

Ended July 11, 2020

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

83,524

$

$

83,524

Operating income (loss)

 

11,640

 

(768)

 

10,872

Net income

 

8,414

 

296

 

8,710

As of and for the Six Months

Ended July 11, 2020

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

120,813

$

$

120,813

Operating income (loss)

 

14,463

 

(1,167)

 

13,296

Net income

 

10,463

 

198

 

10,661

Total assets

$

153,308

$

17,600

$

170,908

For the Three Months

Ended July 13, 2019

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

55,639

$

$

55,639

Operating income (loss)

 

3,017

 

(546)

 

2,471

Net income (loss)

 

2,094

 

(218)

 

1,876

As of and for the Six Months

Ended July 13, 2019

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

87,741

$

$

87,741

Operating income (loss)

 

3,778

 

(913)

 

2,865

Net income (loss)

 

2,602

 

(459)

 

2,143

Total assets

$

148,846

$

6,657

$

155,503

Note G – Dividend Payment

On June 8, 2020, the Company paid a quarterly dividend of $0.125 per common share to all shareholders of record on June 1, 2020. The total amount of the dividend was approximately $1.7 million and was charged against retained earnings.

On March 16, 2020, the Company paid a quarterly dividend of $0.125 per common share to all shareholders of record on March 9, 2020. The total amount of the dividend was approximately $1.8 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

Six Months Ended

    

July 11,

    

July 13,

    

July 11,

    

July 13,

In thousands

2020

2019

2020

2019

Weighted average common shares outstanding

 

14,108

 

14,472

 

14,113

 

14,462

Dilutive effect of stock options and restricted stock units

 

71

 

23

 

66

 

23

Weighted average common shares outstanding, assuming dilution

 

14,179

 

14,495

 

14,179

 

14,485

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 2020 and 2019 were 106,869 and 89,431, respectively.

9

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 six month periods ended July 11, 2020, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019, that are of significance, or potential significance to the Company.

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU) 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this update eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.

The Company adopted this standard on December 29, 2019. The adoption of this standard did not have an impact to the financial statements of the Company.

Note J – Revenue from Contracts with Customers

Revenue Recognition – Effective December 31, 2017, we adopted ASC 606. The adoption of this standard did not impact the timing of revenue recognition for customer sales. 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.

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.

10

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

Six Months Ended

    

July 11,

    

July 13,

    

July 11,

    

July 13,

All Amounts in Thousands

2020

2019

2020

2019

Gross Sales by Channel:

 

  

 

  

 

  

 

  

Mass Merchants

$

27,716

$

18,838

$

41,184

$

30,268

Specialty Dealers

 

22,858

 

16,163

 

35,925

 

29,764

E-commerce

 

39,489

 

24,806

 

53,070

 

34,740

International

 

1,936

 

2,174

 

3,492

 

3,348

Other

595

740

1,071

1,442

Total Gross Sales

 

92,594

 

62,721

 

134,742

 

99,562

 

 

 

 

Less: Gross-to-Net Sales Adjustments

 

 

 

 

Returns

 

2,342

 

1,705

 

3,421

 

2,880

Warranties

 

371

 

359

 

776

 

732

Customer Allowances

 

6,357

 

5,018

 

9,732

 

8,209

Total Gross-to-Net Sales Adjustments

 

9,070

 

7,082

 

13,929

 

11,821

Total Net Sales

$

83,524

$

55,639

$

120,813

$

87,741

Note K – Leases

We have operating leases for office, manufacturing and distribution facilities as well as for certain equipment. Our leases have remaining lease terms of 1 year to 5 years. As of July 11, 2020, 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

Six Months Ended

July 11,

July 13,

July 11,

July 13,

All Amounts in Thousands

    

2020

    

2019

    

2020

    

2019

Lease Expense

 

  

 

  

Operating Lease Cost

$

206

$

253

$

413

$

444

Short-term Lease Cost

251

109

 

274

 

199

Variable Lease Cost

81

86

 

117

 

141

Total Operating Lease Cost

538

$

448

$

804

$

784

Operating Lease - Operating Cash Flows

$

188

$

221

$

375

$

396

New ROU Assets - Operating Leases

$

$

652

$

688

$

725

11

Other information about lease amounts recognized in our consolidated financial statements is summarized as follows:

Six Months Ended

 

July 11,

July 13,

All Amounts in Thousands

    

2020

    

2019

 

Weighted Average Remaining Lease Term – Operating Leases

 

2.45

years

2.07

years

Weighted Average Discount Rate – Operating Leases

 

5.00

%

5.00

%

Future minimum lease payments under non-cancellable leases as of July 11, 2020 were as follows:

All Amounts in Thousands

    

Year 1

$

762

Year 2

 

403

Year 3

 

262

Year 4

 

46

Year 5

 

23

Thereafter

 

Total future minimum lease payments

 

1,496

Less imputed interest

 

(86)

Total

$

1,410

 

Reported as of July 11, 2020

 

Current operating lease liabilities

 

711

Long-term operating lease liabilities

 

699

Total

$

1,410

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.

12

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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; Escalade’s plans and expectations surrounding the transition to its new Chief Executive Officer and all potential related effects and consequences; 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; the 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; fluctuation in operating results; changes in foreign currency exchange rates; changes in the securities markets; 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; risks related to data security of privacy breaches; 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.

Overview

Escalade, Incorporated (Escalade, the Company, we, us or our) is focused on growing its Sporting Goods business through organic growth of existing categories, strategic acquisitions, and new product development. The Sporting Goods business competes in a variety of categories including basketball goals, archery, indoor and outdoor game recreation and fitness products. Strong brands and on-going investment in product development provide a solid foundation for building customer loyalty and continued growth.

Within the sporting goods industry, the Company has successfully built a robust market presence in several niche markets. This strategy is heavily dependent on expanding our customer base, barriers to entry, strong brands, excellent customer service and a commitment to innovation. A key strategic advantage is the Company’s established relationships with major customers that allow the Company to bring new products to market in a cost effective manner while maintaining a diversified portfolio of products to meet the demands of consumers. In addition to strategic customer relations, the Company has substantial manufacturing and import experience that enable it to be a low cost supplier.

To enhance growth opportunities, the Company has focused on promoting new product innovation and development and brand marketing. In addition, the Company has embarked on a strategy of acquiring companies or product lines that complement or expand the Company’s existing product lines or provide expansion into new or emerging categories in sporting goods. A key objective is the acquisition of product lines with barriers to entry that the Company can take to market through its established distribution channels or through new market channels. Significant synergies are achieved through assimilation of acquired product lines into the existing Company structure. The Company also sometimes divests or discontinues certain operations, assets, brands, and products that do not perform to the Company’s expectations or no longer fit with the Company’s strategic objectives.

Management believes that key indicators in measuring the success of these strategies are revenue growth, earnings growth, new product introductions, and the expansion of channels of distribution.

13

COVID-19 Pandemic

The emergence of the coronavirus (COVID-19) around the world, and particularly in the United States and China, presents significant risks to the Company, not all of which the Company is able to fully evaluate or even to foresee at the current time. Economic and health conditions in the United States and across most of the globe have changed rapidly since the end of the Company’s first quarter. In the short-term, demand for the Company’s products has increased, notably in our fitness products, basketball, playground, and indoor/outdoor games. Some of the increase in demand is likely due to consumers being required or encouraged by governmental authorities to stay at home, schools being closed, and employers requiring employees to work remotely and/or implementing furloughs and layoffs. Such increased demand may not continue and/or demand may decrease from historical levels depending on the duration and severity of the COVID-19 pandemic, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties.

In addition, increased customer demand for certain products presents challenges for the Company to anticipate and adjust inventory levels to meet such demand. So far, the Company has been able to obtain products from its suppliers on a timely basis, but management anticipates that there may be delays in the future due to factory and shipping capacities that may impact timing of shipments in the first half of 2021, if not sooner. The Company is seeking to alleviate such concerns by accelerating its timing for placing 2021 orders with its suppliers and by continuing to develop other potential sources of products and raw materials.

The COVID-19 pandemic did affect the Company’s operations in the second quarter and may continue to do so indefinitely thereafter. All of these factors may have far reaching impacts on the Company’s business, operations, and financial results and conditions, directly and indirectly, including without limitation impacts on the health of the Company’s management and employees -many of whom are still working remotely, manufacturing, distribution, marketing and sales operations, customer and consumer behaviors, and on the overall economy. The scope and nature of these impacts, most of which are beyond the Company’s control, continue to evolve and the outcomes are uncertain.

Due to the above circumstances and as described generally in this Form 10-Q, the Company’s results of operations for the three and six month periods ended July 11, 2020 are not necessarily indicative of the results to be expected for the full fiscal year. Management cannot predict the full impact of the COVID-19 pandemic on the Company’s sales channels, supply chain, manufacturing and distribution nor to economic conditions generally, including the effects on consumer spending. The ultimate extent of the effects of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments, and such effects could exist for an extended period of time even after the pandemic might end.

Results of Operations

The following schedule sets forth certain consolidated statement of operations data as a percentage of net revenue:

Three Months Ended 

Six Months Ended 

 

    

July 11, 2020

    

July 13, 2019

    

July 11, 2020

    

July 13, 2019

 

Net revenue

 

100.0

%  

100.0

%  

100.0

%  

100.0

%

Cost of products sold

 

72.2

%  

76.7

%  

72.3

%  

75.6

%

Gross margin

 

27.8

%  

23.3

%  

27.7

%  

24.4

%

Selling, administrative and general expenses

 

14.3

%  

18.0

%  

16.0

%  

20.3

%

Amortization

 

0.5

%  

0.8

%  

0.7

%  

0.9

%

Operating income

 

13.0

%  

4.5

%  

11.0

%  

3.2

%

Revenue and Gross Margin

Sales increased by 50.1% for the second quarter of 2020, compared with the same period in the prior year. The increase in sales was primarily driven by growth in our outdoor and fitness categories, including basketball, Lifeline Fitness and Victory Tailgate as demand for our fitness and home recreation products continues to be high amidst the COVID-19 pandemic. For the first half of 2020, sales were up 37.7% compared to prior year.

The overall gross margin percentage increased to 27.8% for the second quarter of 2020, compared to 23.3% for 2019 primarily due to product mix and operational improvements the Company has performed over the last year. In addition, lower inventory levels and cleaner inventory minimized markdown exposure. The improved margins were partially offset by headwinds in factory utilization due to closures of two of our operating facilities for an extended period of time due to COVID-19 early in the second quarter.

Gross margin percentage increased to 27.7% for the first six months of 2020, compared to 24.4% for the same period in the prior year.

14

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) were $11.9 million for the second quarter of 2020 compared to $10.0 million for the same period in the prior year, an increase of $1.9 million or 18.8%. The increase in SG&A is in line with the growth of the business. SG&A as a percent of sales is 14.3% for the second quarter of 2020 compared with 18.0% for the same period in the prior year. For the first half of 2020, SG&A were $19.4 million compared to $17.8 million for the same period in 2019, an increase of $1.6 million or 9.0%. As a percent of sales, SG&A is 16.0% for the first half of 2020 compared with 20.3% for the same period in the prior year.

Provision for Income Taxes

The effective tax rate for the first half of 2020 was 19.6% compared to 19.9% for the same period last year.

Financial Condition and Liquidity

Total debt at the end of the first six months of 2020 was zero, a decrease of $135 thousand from December 28, 2019. The following schedule summarizes the Company’s total debt:

    

July 11,

    

December 28,

    

July 13,

In thousands

2020

2019

2019

  

  

  

Note payable

$

$

135

$

135

Long term debt

 

 

 

7,393

Total

$

$

135

$

7,528

As a percentage of stockholders’ equity, total debt was zero, 0.1% and 5.9% at July 11, 2020, December 28, 2019, and July 13, 2019 respectively.

On March 24, 2020, the Company entered into a Second Amendment to the Amended and Restated Credit Agreement (“2019 Restated Credit Agreement”) with its issuing bank, JP Morgan Chase Bank, N.A. (“Chase”), and the other lenders identified in the 2019 Restated Credit Agreement (collectively, the “Lender”). The sole purpose of the Second Amendment was to permit an increase in authorized stock repurchases, increasing the limit from $5,000,000 to $15,000,000.

The Company funds working capital requirements through operating cash flows and revolving credit agreements with its bank. Based on working capital requirements, the Company expects to have access to adequate levels of revolving credit to meet growth needs.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Required.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Escalade 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 Rules 13a-15(e) and 15d-15(e). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, could 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.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and 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.

15

Changes in Internal Control over Financial Reporting

Management of the Company has evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the second quarter of 2020.

There have been no changes to the Company’s internal control over financial reporting that occurred since the beginning of the Company’s first quarter of 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

16

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

None.

Item 1A. RISK FACTORS.

The following risk factors are in addition to the risks described in the Company’s Form 10-K under Item 1A, “Risk Factors” for its fiscal year ended December 28, 2019, its Form 10-Q for its fiscal quarter ended March 21, 2020, and in its subsequent periodic reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. The effects of the events and circumstances described in the following risk factors may have the additional effect of heightening many of the risks contained in the Company’s Form 10-K and other periodic reports.

Our operations also could be affected by additional factors that are not presently known to us or that we currently do not consider material to our business.

The ultimate magnitude of the COVID-19 pandemic is unpredictable, volatile and uncertain.

The COVID-19 pandemic has created significant public health concerns and economic disruption. While the Company has experienced substantial increases in sales and order activity through the second quarter of 2020, we cannot predict the full impact of the pandemic nor can we predict with any certainty whether and to what degree the disruptions caused by the pandemic and reactions thereto will continue. Much is unknown, including the duration and severity of the pandemic, the amount of time it may take for more normalized economic activity to resume, future government actions that may be taken, the effects on the Company's customers and suppliers, including their ability to pay for our products, the effects on operations of the Company's logistics providers, and the impact on the ability of the Company's employees to work and travel. While the Company has taken numerous steps to mitigate the potential negative effects of the COVID-19 pandemic, there can be no assurance that the Company will be able to respond quickly enough or appropriately to circumstances that may change rapidly and/or that are outside of our control. The long-term impact of the pandemic on the Company's business is unknown and ultimately could result in material adverse effects on the Company's business, financial performance and results of operations.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

c) Issuer Purchases of Equity Securities

    

    

    

(c) Total Number

    

(d) Maximum Number

(a) Total

of Shares (or Units)

(or Approximate Dollar

Number of

(b) Average

Purchased as Part

Value) of Shares (or

Shares (or

Price Paid

of Publicly

Units) that May Yet Be

Units)

per Share

Announced Plans

Purchased Under the

Period

Purchased

(or Unit)

or Programs

Plans or Programs

Share purchases prior to 3/21/2020 under the current repurchase program.

 

1,397,490

$

9.28

 

1,397,490

$

10,000,330

Second quarter purchases:

 

 

 

 

3/22/2020–4/18/2020

 

None

None

 

No Change

No Change

4/19/2020-5/16/2020

None

None

No Change

No Change

5/17/2020-6/13/2020

 

None

None

 

No Change

No Change

6/14/2020-7/11/2020

 

None

 

None

 

No Change

 

No Change

Total share purchases under the current program

 

1,397,490

$

9.28

 

1,397,490

$

10,000,330

The Company has one stock repurchase program which was established in February 2003 by the Board of Directors and which initially authorized management to expend up to $3,000,000 to repurchase shares on the open market as well as in private negotiated transactions. In February 2005, February 2006, August 2007 and February 2008 the Board of Directors increased the remaining balance on this plan to its original level of $3,000,000. In September 2019, the Board of Directors increased the stock repurchase program from $3,000,000 to $5,000,000. On March 24, 2020, the Board of Directors increased the stock repurchase program from $5,000,000 to $15,000,000. No additional stock repurchases yet have been made pursuant to the increased amount now available for stock repurchases. From its inception date through July 11, 2020, the Company has repurchased 1,397,490 shares of its common stock under this repurchase program for an aggregate price of $12,966,498. The repurchase program has no termination date and there have been no share repurchases that were not part of a publicly announced program.

17

Item 3. DEFAULTS UPON SENIOR SECURITIES.

None.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

Item 5. OTHER INFORMATION.

None.

18

Item 6. EXHIBITS

Number

    

Description

3.1

 

Articles of Incorporation of Escalade, Incorporated. Incorporated by reference from the Company’s 2007 First Quarter Report on Form 10-Q.

 

 

 

3.2

 

Amended By-laws of Escalade, Incorporated, as amended April 22, 2014. Incorporated by reference from the Company’s 2014 First Quarter Report on Form 10-Q.

 

 

 

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.

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

19

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 6, 2020

/s/ Stephen R. Wawrin

 

Vice President and Chief Financial Officer

 

(On behalf of the registrant and in his capacities as Principal Financial Officer and Principal Accounting Officer)

20

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Scott J. Sincerbeaux, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Escalade, Incorporated;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-15(f)) for the registrant and we have:

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2020

/s/ Scott J. Sincerbeaux

Chief Executive Officer


Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Stephen R. Wawrin, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Escalade, Incorporated;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-15(f)) for the registrant and we have:

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2020

/s/ Stephen R. Wawrin

Vice President and Chief Financial Officer

(On behalf of the registrant and in his

capacities as Principal Financial Officer

and Principal Accounting Officer)


Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Escalade, Incorporated (the “Company”) on Form 10-Q for the period ended July 11, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott J. Sincerbeaux, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Scott J. Sincerbeaux

Chief Executive Officer

August 6, 2020


Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Escalade, Incorporated (the “Company”) on Form 10-Q for the period ended July 11, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen R. Wawrin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen R. Wawrin

Vice President and Chief Financial Officer

(On behalf of the registrant and in his

capacities as Principal Financial Officer

and Principal Accounting Officer)

August 6, 2020


v3.20.2
Document and Entity Information - shares
6 Months Ended
Jul. 11, 2020
Jul. 31, 2020
Document and Entity Information    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 0-6966  
Entity Incorporation, State or Country Code IN  
Entity Address, Address Line One 817 Maxwell Ave  
Entity Address, State or Province IN  
Entity Tax Identification Number 13-2739290  
Entity Address, City or Town Evansville  
Entity Address, Postal Zip Code 47711  
City Area Code 812  
Local Phone Number 467-1358  
Security Exchange Name NASDAQ  
Title of 12(b) Security Common Stock, No Par Value  
Amendment Flag false  
Document Period End Date Jul. 11, 2020  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Entity Registrant Name ESCALADE, INCORPORATED  
Entity Central Index Key 0000033488  
Current Fiscal Year End Date --12-28  
Trading Symbol ESCA  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   14,153,579
v3.20.2
CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($)
$ in Thousands
Jul. 11, 2020
Dec. 28, 2019
Jul. 13, 2019
Current Assets:      
Cash and cash equivalents $ 16,669 $ 5,882 $ 4,598
Receivables, less allowance of $728; $483; and $533; respectively 49,516 35,450 35,229
Inventories 41,653 42,269 47,984
Prepaid expenses 2,085 3,151 2,958
Prepaid income tax   163 1,687
TOTAL CURRENT ASSETS 109,923 86,915 92,456
Property, plant and equipment, net 14,713 15,111 15,387
Operating lease right-of-use assets 1,395 1,080 1,288
Intangible assets, net 18,071 18,847 19,529
Goodwill 26,749 26,749 26,749
Other assets 57 77 94
TOTAL ASSETS 170,908 148,779 155,503
Current Liabilities:      
Note payable   135 135
Trade accounts payable 18,109 7,765 7,187
Accrued liabilities 13,196 9,689 7,732
Income tax payable 1,705 0 0
Current operating lease liabilities 711 621 694
TOTAL CURRENT LIABILITIES 33,721 18,210 15,748
Other Liabilities:      
Long-term debt   0 7,393
Deferred income tax liability 3,537 3,537 3,409
Operating lease liabilities 699 475 616
Other liabilities 387 387 1,094
TOTAL LIABILITIES 38,344 22,609 28,260
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 - 14,153,579; 14,214,777; and 14,467,634; shares respectively 14,154 14,215 14,468
Retained earnings 118,410 111,955 112,775
TOTAL STOCKHOLDERS' EQUITY 132,564 126,170 127,243
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 170,908 $ 148,779 $ 155,503
v3.20.2
CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Jul. 11, 2020
Dec. 28, 2019
Jul. 13, 2019
CONSOLIDATED CONDENSED BALANCE SHEETS      
Receivables allowance (in dollars) $ 728 $ 483 $ 533
Preferred stock, shares authorized 1,000,000 1,000,000 1,000,000
Preferred stock, shares issued 0 0 0
Preferred Stock, Par Value $ 0 $ 0 $ 0
Common stock, Par value $ 0 $ 0 $ 0
Common stock, shares authorized 30,000,000 30,000,000 30,000,000
Common stock, shares issued 14,153,579 14,214,777 14,467,634
Common stock, shares outstanding 14,153,579 14,214,777 14,467,634
v3.20.2
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - USD ($)
$ in Thousands
4 Months Ended 6 Months Ended
Jul. 11, 2020
Jul. 13, 2019
Jul. 11, 2020
Jul. 13, 2019
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS        
Net sales $ 83,524 $ 55,639 $ 120,813 $ 87,741
Costs and Expenses        
Cost of products sold 60,289 42,680 87,363 66,305
Selling, administrative and general expenses 11,921 10,038 19,378 17,783
Amortization 442 450 776 788
Operating Income 10,872 2,471 13,296 2,865
Other Income (Expense)        
Interest expense (60) (131) (104) (199)
Other income 22 3 68 9
Income Before Income Taxes 10,834 2,343 13,260 2,675
Provision for Income Taxes 2,124 467 2,599 532
Net Income $ 8,710 $ 1,876 $ 10,661 $ 2,143
Earnings Per Share Data:        
Basic earnings per share $ 0.62 $ 0.13 $ 0.76 $ 0.15
Diluted earnings per share 0.61 0.13 0.75 0.15
Dividends declared $ 0.125 $ 0.125 $ 0.25 $ 0.25
v3.20.2
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($)
$ in Thousands
Common Stock
Retained Earnings
Total
Balance at Dec. 29, 2018 $ 14,439 $ 113,882 $ 128,321
Balance (in shares) at Dec. 29, 2018 14,439    
Net income   2,143 2,143
Expense of stock options and restricted stock units   341 341
Exercise of stock options $ 10 108 118
Exercise of stock options (in shares) 10    
Settlement of restricted stock units $ 25 (25)  
Settlement of restricted stock units (in shares) 25    
Dividends declared   (3,618) (3,618)
Purchase of stock $ (15) (149) (164)
Purchase of stock (in shares) (15)    
Stock issued to directors as compensation $ 9 93 102
Stock issued to directors as compensation (in shares) 9    
Balance at Jul. 13, 2019 $ 14,468 112,775 127,243
Balance (in shares) at Jul. 13, 2019 14,468    
Balance at Mar. 23, 2019 $ 14,471 112,545 127,016
Balance (in shares) at Mar. 23, 2019 14,471    
Net income   1,876 1,876
Expense of stock options and restricted stock units   197 197
Dividends declared   (1,809) (1,809)
Purchase of stock $ (12) (127) (139)
Purchase of stock (in shares) (12)    
Stock issued to directors as compensation $ 9 93 102
Stock issued to directors as compensation (in shares) 9    
Balance at Jul. 13, 2019 $ 14,468 112,775 127,243
Balance (in shares) at Jul. 13, 2019 14,468    
Balance at Dec. 28, 2019 $ 14,215 111,955 126,170
Balance (in shares) at Dec. 28, 2019 14,215    
Net income   10,661 10,661
Expense of stock options and restricted stock units   493 493
Settlement of restricted stock units $ 36 (36)  
Settlement of restricted stock units (in shares) 36    
Issuance of restricted stock awards $ 35 (35)  
Issuance of restricted stock awards (in shares) 35    
Dividends declared   (3,531) (3,531)
Purchase of stock $ (142) (1,184) (1,326)
Purchase of stock (in shares) (142)    
Stock issued to directors as compensation $ 10 87 97
Stock issued to directors as compensation (in shares) 10    
Balance at Jul. 11, 2020 $ 14,154 118,410 132,564
Balance (in shares) at Jul. 11, 2020 14,154    
Balance at Mar. 21, 2020 $ 14,097 111,072 125,169
Balance (in shares) at Mar. 21, 2020 14,097    
Net income   8,710 8,710
Expense of stock options and restricted stock units   357 357
Settlement of restricted stock units $ 12 (12)  
Settlement of restricted stock units (in shares) 12    
Issuance of restricted stock awards $ 35 (35)  
Issuance of restricted stock awards (in shares) 35    
Dividends declared   (1,769) (1,769)
Stock issued to directors as compensation $ 10 87 97
Stock issued to directors as compensation (in shares) 10    
Balance at Jul. 11, 2020 $ 14,154 $ 118,410 $ 132,564
Balance (in shares) at Jul. 11, 2020 14,154    
v3.20.2
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
6 Months Ended
Jul. 11, 2020
Jul. 13, 2019
Operating Activities:    
Net income $ 10,661 $ 2,143
Reconciling adjustments:    
Depreciation and amortization 2,234 2,266
Provision for doubtful accounts 325 259
Loss (gain) on disposal of property and equipment (2) 6
Stock-based compensation 493 341
Adjustments necessary to reconcile net income to net cash provided by operating activities 3,029 (4,822)
Changes in    
Net cash provided by operating activities 16,740 193
Investing Activities:    
Purchase of property and equipment (1,061) (1,377)
Acquisitions   (765)
Payment on note payable related to an acquisition (135) 0
Proceeds from sale of property and equipment 3 4
Net cash used by investing activities (1,193) (2,138)
Financing Activities:    
Proceeds from issuance of long-term debt 6,306 43,299
Payments on long-term debt (6,306) (35,906)
Proceeds from exercise of stock options   118
Deferred financing fees   (112)
Purchase of stock (1,326) (164)
Cash dividends paid (3,531) (3,618)
Director stock compensation 97 102
Net cash provided (used) by financing activities (4,760) 3,719
Net increase in cash and cash equivalents 10,787 1,774
Cash and Cash Equivalents, beginning of period 5,882 2,824
Cash and Cash Equivalents, end of period $ 16,669 4,598
Non-Cash Transactions    
Note payable for deferred purchase price obligation   $ (135)
v3.20.2
Summary of Significant Accounting Policies
6 Months Ended
Jul. 11, 2020
Summary of Significant Accounting Policies  
Summary of Significant Accounting Policies

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 28, 2019 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 2019 filed with the Securities and Exchange Commission.

Reclassifications - Certain reclassifications have been made to prior year financial statements to conform to the current year financial statement presentation. These reclassifications had no effect on net earnings.

v3.20.2
Seasonal Aspects
6 Months Ended
Jul. 11, 2020
Seasonal Aspects  
Seasonal Aspects

Note B – Seasonal Aspects

The results of operations for the three and six month periods ended July 11, 2020 and July 13, 2019 are not necessarily indicative of the results to be expected for the full year.

v3.20.2
Inventories
6 Months Ended
Jul. 11, 2020
Inventories  
Inventories

Note C – Inventories

    

July 11,

    

December 28,

    

July 13,

In thousands

2020

2019

2019

Raw materials

$

6,222

$

3,186

$

4,329

Work in progress

 

3,297

 

2,177

 

2,729

Finished goods

 

32,134

 

36,906

 

40,926

$

41,653

$

42,269

$

47,984

v3.20.2
Fair Values of Financial Instruments
6 Months Ended
Jul. 11, 2020
Fair Values of Financial Instruments  
Fair Values of Financial Instruments

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 July 11, 2020, December 28, 2019 and July 13, 2019.

Fair Value Measurements Using

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

July 11, 2020

Carrying

for Identical

Observable Inputs

Inputs

In thousands

    

Amount

    

Assets (Level 1)

    

(Level 2)

    

(Level 3)

Financial assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

16,669

$

16,669

$

$

 

 

 

 

Fair Value Measurements Using

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

December 28, 2019

Carrying

for Identical

Observable Inputs

Inputs

In thousands

    

Amount

    

Assets (Level 1)

    

(Level 2)

    

(Level 3)

Financial assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

5,882

$

5,882

$

$

Fair Value Measurements Using

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

July 13, 2019

Carrying

for Identical

Observable Inputs

Inputs

In thousands

    

Amount

    

Assets (Level 1)

    

(Level 2)

    

(Level 3)

Financial assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

4,598

$

4,598

$

$

Financial liabilities

Long-term debt

$

7,393

$

$

7,393

$

v3.20.2
Stock Compensation
6 Months Ended
Jul. 11, 2020
Stock Compensation  
Stock Compensation

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 six months ended July 11, 2020 and pursuant to the 2017 Incentive Plan, in lieu of cash payments of director fees, the Company awarded to certain directors 9,448 shares of common stock. During the six months ended July 11, 2020, the Company awarded 22,850 restricted stock units to directors, 113,669 restricted stock units and 35,000 shares of restricted stock 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. All of the 2020 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, and 18,268 of such restricted stock units are also subject to performance conditions. The 35,000 shares of restricted stock vest over three years (40% one year from grant, 30% two years from grant and 30% three years from grant) provided that the employee is still employed by the Company on the vesting date.

For the three and six months ended July 11, 2020, including expense associated with issuing certain directors stock in lieu of cash for certain director fees, the Company recognized stock based compensation expense of $454 thousand and $590 thousand, respectively compared to stock based compensation expense of $299 thousand and $443 thousand for the same periods in the prior year. At July 11, 2020 and July 13, 2019, respectively, there was $1.4 million and $1.0 million in unrecognized stock-based compensation expense related to non-vested stock awards.

v3.20.2
Segment Information
6 Months Ended
Jul. 11, 2020
Segment Information  
Segment Information

Note F – Segment Information

For the Three Months

Ended July 11, 2020

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

83,524

$

$

83,524

Operating income (loss)

 

11,640

 

(768)

 

10,872

Net income

 

8,414

 

296

 

8,710

As of and for the Six Months

Ended July 11, 2020

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

120,813

$

$

120,813

Operating income (loss)

 

14,463

 

(1,167)

 

13,296

Net income

 

10,463

 

198

 

10,661

Total assets

$

153,308

$

17,600

$

170,908

For the Three Months

Ended July 13, 2019

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

55,639

$

$

55,639

Operating income (loss)

 

3,017

 

(546)

 

2,471

Net income (loss)

 

2,094

 

(218)

 

1,876

As of and for the Six Months

Ended July 13, 2019

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

87,741

$

$

87,741

Operating income (loss)

 

3,778

 

(913)

 

2,865

Net income (loss)

 

2,602

 

(459)

 

2,143

Total assets

$

148,846

$

6,657

$

155,503

v3.20.2
Dividend Payment
6 Months Ended
Jul. 11, 2020
Dividend Payment  
Dividend Payment

Note G – Dividend Payment

On June 8, 2020, the Company paid a quarterly dividend of $0.125 per common share to all shareholders of record on June 1, 2020. The total amount of the dividend was approximately $1.7 million and was charged against retained earnings.

On March 16, 2020, the Company paid a quarterly dividend of $0.125 per common share to all shareholders of record on March 9, 2020. The total amount of the dividend was approximately $1.8 million and was charged against retained earnings.

v3.20.2
Earnings Per Share
6 Months Ended
Jul. 11, 2020
Earnings Per Share  
Earnings Per Share

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

Six Months Ended

    

July 11,

    

July 13,

    

July 11,

    

July 13,

In thousands

2020

2019

2020

2019

Weighted average common shares outstanding

 

14,108

 

14,472

 

14,113

 

14,462

Dilutive effect of stock options and restricted stock units

 

71

 

23

 

66

 

23

Weighted average common shares outstanding, assuming dilution

 

14,179

 

14,495

 

14,179

 

14,485

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 2020 and 2019 were 106,869 and 89,431, respectively.

v3.20.2
New Accounting Standards and Changes in Accounting Principles
6 Months Ended
Jul. 11, 2020
New Accounting Standards and Changes in Accounting Principles  
New Accounting Standards and Changes in Accounting Principles

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 six month periods ended July 11, 2020, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019, that are of significance, or potential significance to the Company.

In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU) 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this update eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.

The Company adopted this standard on December 29, 2019. The adoption of this standard did not have an impact to the financial statements of the Company.

v3.20.2
Revenue from Contracts with Customers
6 Months Ended
Jul. 11, 2020
Revenue from Contracts with Customers  
Revenue from Contracts with Customers

Note J – Revenue from Contracts with Customers

Revenue Recognition – Effective December 31, 2017, we adopted ASC 606. The adoption of this standard did not impact the timing of revenue recognition for customer sales. 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.

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

Six Months Ended

    

July 11,

    

July 13,

    

July 11,

    

July 13,

All Amounts in Thousands

2020

2019

2020

2019

Gross Sales by Channel:

 

  

 

  

 

  

 

  

Mass Merchants

$

27,716

$

18,838

$

41,184

$

30,268

Specialty Dealers

 

22,858

 

16,163

 

35,925

 

29,764

E-commerce

 

39,489

 

24,806

 

53,070

 

34,740

International

 

1,936

 

2,174

 

3,492

 

3,348

Other

595

740

1,071

1,442

Total Gross Sales

 

92,594

 

62,721

 

134,742

 

99,562

 

 

 

 

Less: Gross-to-Net Sales Adjustments

 

 

 

 

Returns

 

2,342

 

1,705

 

3,421

 

2,880

Warranties

 

371

 

359

 

776

 

732

Customer Allowances

 

6,357

 

5,018

 

9,732

 

8,209

Total Gross-to-Net Sales Adjustments

 

9,070

 

7,082

 

13,929

 

11,821

Total Net Sales

$

83,524

$

55,639

$

120,813

$

87,741

v3.20.2
Leases
6 Months Ended
Jul. 11, 2020
Leases  
Leases

Note K – Leases

We have operating leases for office, manufacturing and distribution facilities as well as for certain equipment. Our leases have remaining lease terms of 1 year to 5 years. As of July 11, 2020, 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

Six Months Ended

July 11,

July 13,

July 11,

July 13,

All Amounts in Thousands

    

2020

    

2019

    

2020

    

2019

Lease Expense

 

  

 

  

Operating Lease Cost

$

206

$

253

$

413

$

444

Short-term Lease Cost

251

109

 

274

 

199

Variable Lease Cost

81

86

 

117

 

141

Total Operating Lease Cost

538

$

448

$

804

$

784

Operating Lease - Operating Cash Flows

$

188

$

221

$

375

$

396

New ROU Assets - Operating Leases

$

$

652

$

688

$

725

Other information about lease amounts recognized in our consolidated financial statements is summarized as follows:

Six Months Ended

 

July 11,

July 13,

All Amounts in Thousands

    

2020

    

2019

 

Weighted Average Remaining Lease Term – Operating Leases

 

2.45

years

2.07

years

Weighted Average Discount Rate – Operating Leases

 

5.00

%

5.00

%

Future minimum lease payments under non-cancellable leases as of July 11, 2020 were as follows:

All Amounts in Thousands

    

Year 1

$

762

Year 2

 

403

Year 3

 

262

Year 4

 

46

Year 5

 

23

Thereafter

 

Total future minimum lease payments

 

1,496

Less imputed interest

 

(86)

Total

$

1,410

 

Reported as of July 11, 2020

 

Current operating lease liabilities

 

711

Long-term operating lease liabilities

 

699

Total

$

1,410

v3.20.2
Commitments and Contingencies
6 Months Ended
Jul. 11, 2020
Commitments and Contingencies  
Commitments and Contingencies

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.

v3.20.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jul. 11, 2020
Summary of Significant Accounting Policies  
Presentation of Consolidated Condensed Financial Statements

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 28, 2019 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 2019 filed with the Securities and Exchange Commission.

Reclassifications

Reclassifications - Certain reclassifications have been made to prior year financial statements to conform to the current year financial statement presentation. These reclassifications had no effect on net earnings.

v3.20.2
Inventories (Tables)
6 Months Ended
Jul. 11, 2020
Inventories  
Schedule of Inventories

    

July 11,

    

December 28,

    

July 13,

In thousands

2020

2019

2019

Raw materials

$

6,222

$

3,186

$

4,329

Work in progress

 

3,297

 

2,177

 

2,729

Finished goods

 

32,134

 

36,906

 

40,926

$

41,653

$

42,269

$

47,984

v3.20.2
Fair Values of Financial Instruments (Tables)
6 Months Ended
Jul. 11, 2020
Fair Values of Financial Instruments  
Schedule of estimated fair values of the Company's financial instruments

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 July 11, 2020, December 28, 2019 and July 13, 2019.

Fair Value Measurements Using

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

July 11, 2020

Carrying

for Identical

Observable Inputs

Inputs

In thousands

    

Amount

    

Assets (Level 1)

    

(Level 2)

    

(Level 3)

Financial assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

16,669

$

16,669

$

$

 

 

 

 

Fair Value Measurements Using

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

December 28, 2019

Carrying

for Identical

Observable Inputs

Inputs

In thousands

    

Amount

    

Assets (Level 1)

    

(Level 2)

    

(Level 3)

Financial assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

5,882

$

5,882

$

$

Fair Value Measurements Using

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

July 13, 2019

Carrying

for Identical

Observable Inputs

Inputs

In thousands

    

Amount

    

Assets (Level 1)

    

(Level 2)

    

(Level 3)

Financial assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

4,598

$

4,598

$

$

Financial liabilities

Long-term debt

$

7,393

$

$

7,393

$

v3.20.2
Segment Information (Tables)
6 Months Ended
Jul. 11, 2020
Segment Information  
Schedule of certain operating segment information

For the Three Months

Ended July 11, 2020

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

83,524

$

$

83,524

Operating income (loss)

 

11,640

 

(768)

 

10,872

Net income

 

8,414

 

296

 

8,710

As of and for the Six Months

Ended July 11, 2020

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

120,813

$

$

120,813

Operating income (loss)

 

14,463

 

(1,167)

 

13,296

Net income

 

10,463

 

198

 

10,661

Total assets

$

153,308

$

17,600

$

170,908

For the Three Months

Ended July 13, 2019

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

55,639

$

$

55,639

Operating income (loss)

 

3,017

 

(546)

 

2,471

Net income (loss)

 

2,094

 

(218)

 

1,876

As of and for the Six Months

Ended July 13, 2019

In thousands

    

Sporting Goods

    

Corp.

    

Total

Revenues from external customers

$

87,741

$

$

87,741

Operating income (loss)

 

3,778

 

(913)

 

2,865

Net income (loss)

 

2,602

 

(459)

 

2,143

Total assets

$

148,846

$

6,657

$

155,503

v3.20.2
Earnings Per Share (Tables)
6 Months Ended
Jul. 11, 2020
Earnings Per Share  
Schedule of weighted average number of shares

The shares used in computation of the Company’s basic and diluted earnings per common share are as follows:

Three Months Ended

Six Months Ended

    

July 11,

    

July 13,

    

July 11,

    

July 13,

In thousands

2020

2019

2020

2019

Weighted average common shares outstanding

 

14,108

 

14,472

 

14,113

 

14,462

Dilutive effect of stock options and restricted stock units

 

71

 

23

 

66

 

23

Weighted average common shares outstanding, assuming dilution

 

14,179

 

14,495

 

14,179

 

14,485

v3.20.2
Revenue from Contracts with Customers (Tables)
6 Months Ended
Jul. 11, 2020
Revenue from Contracts with Customers  
Schedule of disaggregation of revenue

Three Months Ended

Six Months Ended

    

July 11,

    

July 13,

    

July 11,

    

July 13,

All Amounts in Thousands

2020

2019

2020

2019

Gross Sales by Channel:

 

  

 

  

 

  

 

  

Mass Merchants

$

27,716

$

18,838

$

41,184

$

30,268

Specialty Dealers

 

22,858

 

16,163

 

35,925

 

29,764

E-commerce

 

39,489

 

24,806

 

53,070

 

34,740

International

 

1,936

 

2,174

 

3,492

 

3,348

Other

595

740

1,071

1,442

Total Gross Sales

 

92,594

 

62,721

 

134,742

 

99,562

 

 

 

 

Less: Gross-to-Net Sales Adjustments

 

 

 

 

Returns

 

2,342

 

1,705

 

3,421

 

2,880

Warranties

 

371

 

359

 

776

 

732

Customer Allowances

 

6,357

 

5,018

 

9,732

 

8,209

Total Gross-to-Net Sales Adjustments

 

9,070

 

7,082

 

13,929

 

11,821

Total Net Sales

$

83,524

$

55,639

$

120,813

$

87,741

v3.20.2
Leases (Tables)
6 Months Ended
Jul. 11, 2020
Leases  
Schedule of lease, cost

Three Months Ended

Six Months Ended

July 11,

July 13,

July 11,

July 13,

All Amounts in Thousands

    

2020

    

2019

    

2020

    

2019

Lease Expense

 

  

 

  

Operating Lease Cost

$

206

$

253

$

413

$

444

Short-term Lease Cost

251

109

 

274

 

199

Variable Lease Cost

81

86

 

117

 

141

Total Operating Lease Cost

538

$

448

$

804

$

784

Operating Lease - Operating Cash Flows

$

188

$

221

$

375

$

396

New ROU Assets - Operating Leases

$

$

652

$

688

$

725

Other information about lease amounts recognized in our consolidated financial statements is summarized as follows:

Six Months Ended

 

July 11,

July 13,

All Amounts in Thousands

    

2020

    

2019

 

Weighted Average Remaining Lease Term – Operating Leases

 

2.45

years

2.07

years

Weighted Average Discount Rate – Operating Leases

 

5.00

%

5.00

%

Schedule of future minimum rental payments for operating leases

Future minimum lease payments under non-cancellable leases as of July 11, 2020 were as follows:

All Amounts in Thousands

    

Year 1

$

762

Year 2

 

403

Year 3

 

262

Year 4

 

46

Year 5

 

23

Thereafter

 

Total future minimum lease payments

 

1,496

Less imputed interest

 

(86)

Total

$

1,410

 

Reported as of July 11, 2020

 

Current operating lease liabilities

 

711

Long-term operating lease liabilities

 

699

Total

$

1,410

v3.20.2
Inventories (Details) - USD ($)
$ in Thousands
Jul. 11, 2020
Dec. 28, 2019
Jul. 13, 2019
Inventories      
Raw materials $ 6,222 $ 3,186 $ 4,329
Work in progress 3,297 2,177 2,729
Finished goods 32,134 36,906 40,926
Inventories $ 41,653 $ 42,269 $ 47,984
v3.20.2
Fair Values of Financial Instruments (Details) - USD ($)
$ in Thousands
Jul. 11, 2020
Dec. 28, 2019
Jul. 13, 2019
Financial assets, Carrying Amount      
Cash and cash equivalents $ 16,669 $ 5,882 $ 4,598
Financial liabilities, Fair Value      
Long-term debt, Fair Value     7,393
Fair Value, Inputs, Level 1 [Member]      
Financial assets, Carrying Amount      
Cash and cash equivalents 16,669 5,882 4,598
Fair Value, Inputs, Level 2 [Member]      
Financial assets, Carrying Amount      
Cash and cash equivalents 0 0 0
Financial liabilities, Fair Value      
Long-term debt, Fair Value     7,393
Fair Value, Inputs, Level 3 [Member]      
Financial assets, Carrying Amount      
Cash and cash equivalents $ 0 $ 0 $ 0
v3.20.2
Stock Compensation (Details) - USD ($)
$ in Thousands
4 Months Ended 6 Months Ended
Jul. 11, 2020
Jul. 13, 2019
Jul. 11, 2020
Jul. 13, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Allocated Share-based Compensation Expense $ 454 $ 299 $ 590 $ 443
Director [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Common stock issued in lieu of cash payments of director fees     9,448  
Restricted Stock Units (RSUs) [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Awards subject to performance conditions     18,268  
Restricted Stock Units (RSUs) [Member] | Director [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross     22,850  
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period     2 years  
Restricted Stock Units (RSUs) [Member] | Employees [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross     113,669  
Nonvested Stock Awards [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Employee and Non Employee Service Share-based Compensation Nonvested Awards Total Compensation Cost Not Yet Recognized $ 1,400 $ 1,000 $ 1,400 $ 1,000
Restricted Stock | Employees [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Awards granted     35,000  
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period     3 years  
One year from grant | Restricted Stock Units (RSUs) [Member] | Director [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting percentage     0.50%  
One year from grant | Restricted Stock Units (RSUs) [Member] | Employees [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting percentage     0.30%  
One year from grant | Restricted Stock | Employees [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting percentage     40.00%  
Two years from grant | Restricted Stock Units (RSUs) [Member] | Director [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting percentage     0.50%  
Two years from grant | Restricted Stock Units (RSUs) [Member] | Employees [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting percentage     0.30%  
Two years from grant | Restricted Stock | Employees [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting percentage     30.00%  
Three years from grant | Restricted Stock Units (RSUs) [Member] | Employees [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting percentage     0.30%  
Three years from grant | Restricted Stock | Employees [Member]        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]        
Vesting percentage     30.00%  
v3.20.2
Segment Information (Details) - USD ($)
$ in Thousands
4 Months Ended 6 Months Ended
Jul. 11, 2020
Jul. 13, 2019
Jul. 11, 2020
Jul. 13, 2019
Dec. 28, 2019
Segment Reporting Information [Line Items]          
Revenues from external customers $ 83,524 $ 55,639 $ 120,813 $ 87,741  
Operating income (loss) 10,872 2,471 13,296 2,865  
Net income 8,710 1,876 10,661 2,143  
Total assets 170,908 155,503 170,908 155,503 $ 148,779
Sporting Goods [Member]          
Segment Reporting Information [Line Items]          
Revenues from external customers 83,524 55,639 120,813 87,741  
Operating income (loss) 11,640 3,017 14,463 3,778  
Net income 8,414 2,094 10,463 2,602  
Total assets 153,308 148,846 153,308 148,846  
Corporate Segment [Member]          
Segment Reporting Information [Line Items]          
Revenues from external customers     0 0  
Operating income (loss) (768) (546) (1,167) (913)  
Net income 296 (218) 198 (459)  
Total assets $ 17,600 $ 6,657 $ 17,600 $ 6,657  
v3.20.2
Dividend Payment (Details) - USD ($)
$ / shares in Units, $ in Thousands
4 Months Ended 6 Months Ended
Jun. 08, 2020
Mar. 16, 2020
Jul. 11, 2020
Jul. 13, 2019
Jul. 11, 2020
Jul. 13, 2019
Dividend Payment            
Common Stock, Dividends, Per Share, Cash Paid $ 0.125 $ 0.125        
Dividends, Common Stock, Cash $ 1,700 $ 1,800 $ 1,769 $ 1,809 $ 3,531 $ 3,618
v3.20.2
Earnings Per Share (Details) - shares
shares in Thousands
4 Months Ended 6 Months Ended
Jul. 11, 2020
Jul. 13, 2019
Jul. 11, 2020
Jul. 13, 2019
Earnings Per Share        
Weighted average common shares outstanding 14,108 14,472 14,113 14,462
Dilutive effect of stock options and restricted stock units 71 23 66 23
Weighted average common shares outstanding, assuming dilution 14,179 14,495 14,179 14,485
v3.20.2
Earnings Per Share - Additional Information (Details) - shares
6 Months Ended
Jul. 11, 2020
Jul. 13, 2019
Earnings Per Share    
Number of anti-dilutive stock options and unvested restricted stock units 106,869 89,431
v3.20.2
Revenue from Contracts with Customers (Details) - USD ($)
$ in Thousands
4 Months Ended 6 Months Ended
Jul. 11, 2020
Jul. 13, 2019
Jul. 11, 2020
Jul. 13, 2019
Sales Revenues Goods Net [Abstract]        
Total Gross Sales $ 92,594 $ 62,721 $ 134,742 $ 99,562
Sales Returns And Allowance Goods [Abstract]        
Returns 2,342 1,705 3,421 2,880
Warranties 371 359 776 732
Customer Allowances 6,357 5,018 9,732 8,209
Total Gross-to-Net Sales Adjustments 9,070 7,082 13,929 11,821
Total Net Sales 83,524 55,639 120,813 87,741
Mass Merchants [Member]        
Sales Revenues Goods Net [Abstract]        
Total Gross Sales 27,716 18,838 41,184 30,268
Specialty Dealers [Member]        
Sales Revenues Goods Net [Abstract]        
Total Gross Sales 22,858 16,163 35,925 29,764
E-commerce [Member]        
Sales Revenues Goods Net [Abstract]        
Total Gross Sales 39,489 24,806 53,070 34,740
International [Member]        
Sales Revenues Goods Net [Abstract]        
Total Gross Sales 1,936 2,174 3,492 3,348
Other [Member]        
Sales Revenues Goods Net [Abstract]        
Total Gross Sales $ 595 $ 740 $ 1,071 $ 1,442
v3.20.2
Leases (Details) - USD ($)
$ in Thousands
4 Months Ended 6 Months Ended
Jul. 11, 2020
Jul. 13, 2019
Jul. 11, 2020
Jul. 13, 2019
Lease Expense        
Operating Lease Cost $ 206 $ 253 $ 413 $ 444
Short-term Lease Cost 251 109 274 199
Variable Lease Cost 81 86 117 141
Total Operating Lease Cost 538 448 804 784
Operating Lease - Operating Cash Flows $ 188 221 375 396
New ROU Assets - Operating Leases   $ 652 $ 688 $ 725
Weighted Average Remaining Lease Term - Operating Leases 2 years 5 months 12 days 2 years 25 days 2 years 5 months 12 days 2 years 25 days
Weighted Average Discount Rate - Operating Leases 5.00% 5.00% 5.00% 5.00%
v3.20.2
Leases - Future minimum lease payments (Details) - USD ($)
$ in Thousands
Jul. 11, 2020
Dec. 28, 2019
Jul. 13, 2019
Leases      
Year 1 $ 762    
Year 2 403    
Year 3 262    
Year 4 46    
Year 5 23    
Thereafter 0    
Total future minimum lease payments 1,496    
Less imputed interest (86)    
Total 1,410    
Current operating lease liabilities 711 $ 621 $ 694
Long-term operating lease liabilities 699 $ 475 $ 616
Total $ 1,410    
v3.20.2
Leases - Additional Information (Details)
6 Months Ended
Jul. 11, 2020
Maximum [Member]  
Operating Lease Remaining Lease Term 5 years
Minimum [Member]  
Operating Lease Remaining Lease Term 1 year