UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
For the transition period from _____ to _____
Commission File Number
(Exact name of registrant as specified in its charter)
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(State of incorporation) |
(I.R.S. EIN) |
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(Address of principal executive office) |
(Zip Code) |
(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 |
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The |
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.
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).
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.
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Large accelerated filer ☐ |
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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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class |
Outstanding at October 21, 2022 |
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Common, no par value |
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INDEX
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Page |
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Part I. |
Financial Information: |
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Item 1 - |
Financial Statements: |
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Consolidated Condensed Balance Sheets as of October 1, 2022, December 825, 2021, and October 2, 2021 |
3 |
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Consolidated Condensed Statements of Operations for the Three Months and Nine Months Ended October 1, 2022 and October 2, 2021 |
4 |
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Consolidated Condensed Statements of Stockholders’ Equity for the Three Months and Nine Months Ended October 1, 2022 and October 2, 2021 |
5 |
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Consolidated Condensed Statements of Cash Flows for the Nine Months Ended October 1, 2022 and October 2, 2021 |
6 |
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Notes to Consolidated Condensed Financial Statements |
7 |
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Item 2 - |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 |
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Item 3 - |
Quantitative and Qualitative Disclosures About Market Risk |
17 |
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Item 4 - |
Controls and Procedures |
17 |
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Part II. |
Other Information |
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Item 1A - |
Risk Factors |
18 |
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Item 2 - |
Unregistered Sales of Equity Securities and Use of Proceeds |
18 |
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Item 6 - |
Exhibits |
19 |
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Signature |
19 |
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
|
All Amounts in Thousands Except Share Information |
October 1, 2022 |
December 25, |
October 2, 2021 |
|||||||||
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(Unaudited) |
(Audited) |
(Unaudited) |
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ASSETS |
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| Current Assets: | ||||||||||||
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Cash and cash equivalents |
$ | $ | $ | |||||||||
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Receivables, less allowance of $ |
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Inventories |
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Prepaid expenses |
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Prepaid income tax |
-- | |||||||||||
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TOTAL CURRENT ASSETS |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Intangible assets, net |
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Goodwill |
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Other assets |
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TOTAL ASSETS |
$ | $ | $ | |||||||||
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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| Current Liabilities: | ||||||||||||
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Current portion of long-term debt |
$ | $ | $ | |||||||||
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Trade accounts payable |
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Accrued liabilities |
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Income tax payable |
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Current operating lease liabilities |
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TOTAL CURRENT LIABILITIES |
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| Other Liabilities: | ||||||||||||
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Long‑term debt |
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Deferred income tax liability |
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Operating lease liabilities |
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Other liabilities |
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TOTAL LIABILITIES |
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| Stockholders' Equity: | ||||||||||||
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Preferred stock: |
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| Authorized |
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Common stock: |
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Authorized |
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Retained earnings |
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TOTAL STOCKHOLDERS' EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ | $ | $ | |||||||||
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
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All Amounts in Thousands Except Per Share Data |
October 1, |
October 2, |
October 1, |
October 2, |
||||||||||||
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Net sales |
$ | $ | $ | $ | ||||||||||||
| Costs and Expenses | ||||||||||||||||
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Cost of products sold |
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Selling, administrative and general expenses |
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Amortization |
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Operating Income |
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| Other Income (Expense) | ||||||||||||||||
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Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Other income (expense) |
( |
) | ||||||||||||||
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Income Before Income Taxes |
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Provision for Income Taxes |
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Net Income |
$ | $ | $ | $ | ||||||||||||
| Earnings Per Share Data: | ||||||||||||||||
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Basic earnings per share |
$ | $ | $ | $ | ||||||||||||
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Diluted earnings per share |
$ | $ | $ | $ | ||||||||||||
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Dividends declared |
$ | $ | $ | $ | ||||||||||||
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)
|
Common Stock |
Retained |
|||||||||||||||
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All Amounts in Thousands |
Shares |
Amount |
Earnings |
Total |
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Balances at July 10, 2021 |
$ | $ | $ | |||||||||||||
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Net income |
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Expense of stock options and restricted stock units |
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Dividends declared |
( |
) | ( |
) | ||||||||||||
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Purchase of stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Stock issued to directors as compensation |
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Balances at October 2, 2021 |
$ | $ | $ | |||||||||||||
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Balances at December 26, 2020 |
$ | $ | $ | |||||||||||||
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Net income |
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Expense of stock options and restricted stock units |
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Exercise of stock options |
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Settlement of restricted stock units |
( |
) | -- | |||||||||||||
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Dividends declared |
( |
) | ( |
) | ||||||||||||
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Purchase of stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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Stock issued to directors as compensation |
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Balances at October 2, 2021 |
$ | $ | $ | |||||||||||||
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Common Stock |
Retained |
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All Amounts in Thousands |
Shares |
Amount |
Earnings |
Total |
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Balances at July 9, 2022 |
$ | $ | $ | |||||||||||||
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Net income |
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Expense of restricted stock units |
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Dividends declared |
( |
) | ( |
) | ||||||||||||
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Balances at October 1, 2022 |
13,590 | $ | 13,590 | $ | 143,699 | $ | 157,289 | |||||||||
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Balances at December 25, 2021 |
$ | $ | $ | |||||||||||||
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Net income |
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Expense of restricted stock units |
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Settlement of restricted stock units |
( |
) | -- | |||||||||||||
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Dividends declared |
( |
) | ( |
) | ||||||||||||
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Stock issued to directors as compensation |
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Balances at October 1, 2022 |
$ | $ | $ | |||||||||||||
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
Nine Months Ended |
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All Amounts in Thousands |
October 1, 2022 |
October 2, 2021 |
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| Operating Activities: | ||||||||
|
Net income |
$ | $ | ||||||
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Depreciation and amortization |
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Provision for doubtful accounts |
( |
) | ||||||
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Stock-based compensation |
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Gain on disposal of property and equipment |
( |
) | ( |
) | ||||
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Adjustments necessary to reconcile net income to net cash used by operating activities |
( |
) | ( |
) | ||||
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Net cash used by operating activities |
( |
) | ( |
) | ||||
| Investing Activities: | ||||||||
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Purchase of property and equipment |
( |
) | ( |
) | ||||
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Proceeds from sale of property and equipment |
||||||||
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Acquisitions |
( |
) | -- | |||||
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Net cash used by investing activities |
( |
) | ( |
) | ||||
| Financing Activities: | ||||||||
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Proceeds from issuance of long-term debt |
||||||||
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Payments on long-term debt |
( |
) | ( |
) | ||||
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Proceeds from exercise of stock options |
-- | |||||||
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Purchase of stock |
-- | ( |
) | |||||
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Director stock compensation |
||||||||
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Deferred financing fees |
( |
) | ( |
) | ||||
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Cash dividends paid |
( |
) | ( |
) | ||||
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Net cash provided by financing activities |
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Net increase (decrease) in cash and cash equivalents |
( |
) | ||||||
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Cash and cash equivalents, beginning of period |
||||||||
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Cash and cash equivalents, end of period |
$ | $ | ||||||
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note A – Summary of Significant Accounting Policies
Presentation of Consolidated Condensed Financial Statements
Note B ‑ Seasonal Aspects
The results of operations for the three and nine month periods ended October 1, 2022 and October 2, 2021 are not necessarily indicative of the results to be expected for the full year.
Note C ‑ Inventories
|
In thousands |
October 1, 2022 |
December 25, |
October 2, 2021 |
|||||||||
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Raw materials |
$ | $ | $ | |||||||||
|
Work in progress |
||||||||||||
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Finished goods |
||||||||||||
| $ | $ | $ | ||||||||||
Note D – Fair Values of Financial Instruments
The following methods were used to estimate the fair value of all financial instruments recognized in the accompanying balance sheets at amounts other than fair values.
Cash and Cash Equivalents
Fair values of cash and cash equivalents approximate cost due to the short period of time to maturity.
Long-term Debt
Fair values of long-term debt is estimated based on borrowing rates currently available to the Company for bank loans with similar terms and maturities and determined through the use of a discounted cash flow model.
The following table presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall in accordance with FASB ASC 825 at October 1, 2022, December 25, 2021 and October 2, 2021.
|
Fair Value Measurements Using |
||||||||||||||||
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October 1, 2022 In thousands |
Carrying |
Quoted Prices in |
Significant Other |
Significant |
||||||||||||
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Financial assets |
||||||||||||||||
|
Cash and cash equivalents |
$ | $ | $ | -- | $ | -- | ||||||||||
|
Financial liabilities |
||||||||||||||||
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Current portion of long-term debt |
$ | $ | -- | $ | $ | -- | ||||||||||
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Long-term debt |
$ | $ | -- | $ | $ | -- | ||||||||||
|
Fair Value Measurements Using |
||||||||||||||||
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December 25, 2021 In thousands |
Carrying Amount |
Quoted Prices in |
Significant Other |
Significant (Level 3) |
||||||||||||
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Financial assets |
||||||||||||||||
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Cash and cash equivalents |
$ | $ | $ | -- | $ | -- | ||||||||||
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Financial liabilities |
||||||||||||||||
|
Current portion of long-term debt |
$ | $ | -- | $ | $ | -- | ||||||||||
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Long-term debt |
$ | $ | -- | $ | $ | -- | ||||||||||
|
Fair Value Measurements Using |
||||||||||||||||
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October 2, 2021 In thousands |
Carrying \Amount |
Quoted Prices in |
Significant Other Observable Inputs |
Significant |
||||||||||||
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Financial assets |
||||||||||||||||
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Cash and cash equivalents |
$ | $ | $ | -- | $ | -- | ||||||||||
|
Financial liabilities |
||||||||||||||||
|
Current portion of long-term debt |
$ | $ | -- | $ | $ | -- | ||||||||||
|
Long-term debt |
$ | $ | -- | $ | $ | -- | ||||||||||
Note E – Stock Compensation
The fair value of stock-based compensation is recognized in accordance with the provisions of FASB ASC 718, Stock Compensation.
During the nine months ended October 1, 2022 and pursuant to the 2017 Incentive Plan, in lieu of cash payments of director fees, the Company awarded to certain directors
For the three and nine months ended October 1, 2022, the Company recognized stock based compensation expense of $
Note F ‑ Segment Information
|
For the Three Months Ended October 1, 2022 |
||||||||||||
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In thousands |
Sporting |
Corp. |
Total |
|||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Operating income (loss) |
( |
) | ||||||||||
|
Net income (loss) |
||||||||||||
|
As of and for the Nine Months Ended October 1, 2022 |
||||||||||||
|
In thousands |
Sporting |
Corp. |
Total |
|||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Operating income (loss) |
( |
) | ||||||||||
|
Net income |
||||||||||||
|
Total assets |
$ | $ | $ | |||||||||
|
For the Three Months Ended October 2, 2021 |
||||||||||||
|
In thousands |
Sporting |
Corp. |
Total |
|||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Operating income (loss) |
( |
) | ||||||||||
|
Net income |
||||||||||||
|
As of and for the Nine Months Ended October 2, 2021 |
||||||||||||
|
In thousands |
Sporting |
Corp. |
Total |
|||||||||
|
Revenues from external customers |
$ | $ | $ | |||||||||
|
Operating income (loss) |
( |
) | ||||||||||
|
Net income |
||||||||||||
|
Total assets |
$ | $ | $ | |||||||||
Note G – Dividend Payment
On September 13, 2022, the Company paid a quarterly dividend of $
On June 7, 2022, the Company paid a quarterly dividend of $
On March 21, 2022, the Company paid a quarterly dividend of $
Note H ‑ Earnings Per Share
The shares used in computation of the Company’s basic and diluted earnings per common share are as follows:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
In thousands |
October 1, |
October 2, |
October 1, |
October 2, |
||||||||||||
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Weighted average common shares outstanding |
||||||||||||||||
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Dilutive effect of stock options and restricted stock units |
||||||||||||||||
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Weighted average common shares outstanding, assuming dilution |
||||||||||||||||
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 2022 and 2021 were
Note I – New Accounting Standards and Changes in Accounting Principles
There have been no recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended October 1, 2022, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2021, that are of significance, or potential significance to the Company.
Note J – Revenue from Contracts with Customers
Revenue Recognition – Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our goods at a point in time based on shipping terms and transfer of title. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue.
Gross-to-net sales adjustments – We recognize revenue net of various sales adjustments to arrive at net sales as reported on the statement of operations. These adjustments are referred to as gross-to-net sales adjustments and primarily fall into one of three categories: returns, warranties and customer allowances.
Returns – The Company records an accrued liability and reduction in sales for estimated product returns based upon historical experience. An accrued liability and reduction in sales is also recorded for approved return authorizations that have been communicated by the customer.
Warranties – Limited warranties are provided on certain products for varying periods. We record an accrued liability and reduction in sales for estimated future warranty claims based upon historical experience and management’s estimate of the level of future claims. Changes in the estimated amounts recognized in prior years are recorded as an adjustment to the accrued liability and sales in the current year.
Customer Allowances – Customer allowances are common practice in the industries in which the Company operates. These agreements are typically in the form of advertising subsidies, volume rebates and catalog allowances and are accounted for as a reduction to gross sales. The Company reviews such allowances on an ongoing basis and accruals are adjusted, if necessary, as additional information becomes available.
Disaggregation of Revenue – We generate revenue from the sale of widely recognized sporting goods brands in basketball goals, archery, indoor and outdoor game recreation and fitness products. These products are sold through multiple sales channels that include: mass merchants, specialty dealers, key on-line retailers (“E-commerce”) and international. The following table depicts the disaggregation of revenue according to sales channel:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
All Amounts in Thousands |
October 1, |
October 2, |
October 1, |
October 2, |
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|
Gross Sales by Channel: |
||||||||||||||||
|
Mass Merchants |
$ | $ | $ | $ | ||||||||||||
|
Specialty Dealers |
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E-commerce |
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International |
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Other |
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Total Gross Sales |
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Less: Gross-to-Net Sales Adjustments |
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Returns |
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Warranties |
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|
Customer Allowances |
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|
Total Gross-to-Net Sales Adjustments |
||||||||||||||||
|
Total Net Sales |
$ | $ | $ | $ | ||||||||||||
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 10 years. As of October 1, 2022, 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 is as follows:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
All Amounts in Thousands |
October 1, |
October 2, |
October 1, 2022 |
October 2, |
||||||||||||
|
Lease Expense |
||||||||||||||||
|
Operating Lease Cost |
$ | $ | $ | $ | ||||||||||||
|
Short-term Lease Cost |
||||||||||||||||
|
Variable Lease Cost |
||||||||||||||||
|
Total Operating Lease Cost |
$ | $ | $ | $ | ||||||||||||
|
Operating Lease – Operating Cash Flows |
$ | $ | $ | $ | ||||||||||||
|
New ROU Assets – Operating Leases |
$ | $ | $ | $ | ||||||||||||
Other information about lease amounts recognized in our consolidated financial statements is summarized as follows:
|
Nine Months Ended |
||||||||
|
All Amounts in Thousands |
October 1, |
October 2, |
||||||
|
Weighted Average Remaining Lease Term – Operating Leases (in years) |
||||||||
|
Weighted Average Discount Rate – Operating Leases |
% | % | ||||||
Future minimum lease payments under non-cancellable leases as of October 1, 2022 were as follows:
|
All Amounts in Thousands |
||||
|
Year 1 |
$ | |||
|
Year 2 |
||||
|
Year 3 |
||||
|
Year 4 |
||||
|
Year 5 |
||||
|
Thereafter |
||||
|
Total future minimum lease payments |
||||
|
Less imputed interest |
( |
) | ||
|
Total |
$ | |||
|
Reported as of October 1, 2022 |
||||
|
Current operating lease liabilities |
||||
|
Long-term operating lease liabilities |
||||
|
Total |
$ |
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.
Note M – Acquisition
On January 21, 2022, the Company completed its acquisition of the assets constituting the Brunswick Billiards business of Life Fitness, LLC. The purchase price of the acquisition is $
Note N – Debt
On January 21, 2022, the Company entered into an Amended and Restated Credit Agreement (“Restated Credit Agreement”) with its issuing bank, JP Morgan Chase Bank, N.A. (“Chase”), and the other lenders identified in the Restated Credit Agreement (collectively, the “Lender”). Under the terms of the Restated Credit Agreement, Old National Bank has been added as a Lender. The Lenders have now made available to the Company a senior revolving credit facility with increased maximum availability of $
On July 18, 2022, the Company entered into the First Amendment to the Restated Credit Agreement. Under the terms of the First Amendment, the Lender increased the maximum availability under the senior revolving credit facility from $
As of October 1, 2022, the outstanding principal amount of the term loan was $
Note O – Subsequent Events
On October 26, 2022, the Company entered into the Second Amendment ("Second Amendment”) to the Restated Credit Agreement. Under the terms of the Second Amendment, the Lender increased the maximum availability under the senior revolving credit facility from $
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; the impact of competitive products and pricing; product demand and market acceptance; new product development; Escalade’s ability to achieve its business objectives, especially with respect to its Sporting Goods business on which it has chosen to focus; Escalade’s ability to successfully achieve the anticipated results of strategic transactions, including the integration of the operations of acquired assets and businesses and of divestitures or discontinuances of certain operations, assets, brands, and products; the continuation and development of key customer, supplier, licensing and other business relationships; Escalade’s ability to develop and implement our own direct to consumer e-commerce distribution channel; Escalade’s ability to successfully negotiate the shifting retail environment and changes in consumer buying habits; the financial health of our customers; disruptions or delays in our business operations, including without limitation disruptions or delays in our supply chain, arising from political unrest, war, labor strikes, natural disasters, public health crises such as the coronavirus pandemic, and other events and circumstances beyond our control; Escalade’s ability to control costs; Escalade’s ability to successfully implement actions to lessen the potential impacts of tariffs and other trade restrictions applicable to our products and raw materials, including impacts on the costs of producing our goods, importing products and materials into our markets for sale, and on the pricing of our products; general economic conditions; fluctuation in operating results; changes in foreign currency exchange rates; changes in the securities markets; continued listing of the Company’s common stock on the NASDAQ Global Market; the Company’s inclusion or exclusion from certain market indices; Escalade’s ability to obtain financing and to maintain compliance with the terms of such financing; the availability, integration and effective operation of information systems and other technology, and the potential interruption of such systems or technology; risks related to data security of privacy breaches; the potential impact of actual or perceived defects in, or safety of, our products, including any impact of product recalls or legal or regulatory claims, proceedings or investigations involving our products; 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, billiards, 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. In January 2022, the Company completed its acquisition of the assets of the Brunswick Billiards® business, complementing its existing portfolio of billiards brands and other offerings in the Company’s indoor recreation market. 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.
As the impact of the COVID-19 pandemic evolves, the Company continues to respond to the challenges and opportunities arising from the COVID-19 pandemic. Even though the pandemic may not have had a material adverse direct effect on the Company, the pandemic’s effects on the global supply chain, higher freight and materials costs, supplier product delays, workforce availability and labor costs have caused operational challenges for the Company. 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 ends. Consumer demand for the Company’s products may be slowing due to additional factors such as general economic conditions, inflation, recessionary fears, rising interest rates, changes in the housing market and declining consumer confidence. Management cannot predict the full impact of these factors on the Company. Due to the above circumstances and as described generally in this Form 10-Q, the Company’s results of operations for the period ended October 1, 2022 are not necessarily indicative of the results to be expected for fiscal year 2022.
Results of Operations
The following schedule sets forth certain consolidated statement of operations data as a percentage of net revenue:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||
|
Net revenue |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
Cost of products sold |
81.8 | % | 77.5 | % | 76.2 | % | 74.7 | % | ||||||||
|
Gross margin |
18.2 | % | 22.5 | % | 23.8 | % | 25.3 | % | ||||||||
|
Selling, administrative and general expenses |
11.7 | % | 12.6 | % | 14.0 | % | 14.1 | % | ||||||||
|
Amortization |
0.9 | % | 0.5 | % | 0.9 | % | 0.6 | % | ||||||||
|
Operating income |
5.6 | % | 9.4 | % | 8.9 | % | 10.6 | % | ||||||||
Revenue and Gross Margin
Sales decreased by 7.9% for the third quarter of 2022, compared with the same period in the prior year. Sales declined due to softening consumer demand and excess inventories in the retail channel. During the third quarter of 2022, increases in billiards and pickleball sales, together with the contribution from the Brunswick Billiards® acquisition completed January 21, 2022, were more than offset by lower sales in outdoor categories including archery, games, water sports, and playground. For the first nine months of 2022, sales were up 0.6% compared to prior year.
Gross margin declined to 18.2% for the third quarter of 2022 compared to 22.5% for the same period in 2021 due to lower sales, unfavorable product mix, global supply chain constraints, and nonrecurring product recall expenses.
Gross margin percentage decreased to 23.8% for the first nine months of 2022, compared to 25.3% for the same period in the prior year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) were $8.8 million for the third quarter of 2022 compared to $10.2 million for the same period in the prior year, a decrease of $1.4 million or 14.0%. SG&A as a percent of sales is 11.7% for the third quarter of 2022 compared with 12.6% for the same period in the prior year. For the first nine months of 2022, SG&A were $34.0 million compared to $33.9 million for the same period in 2021, an increase of $0.1 million or 0.3%. As a percent of sales, SG&A is 14.0% for the first nine months of 2022 compared with 14.1% for the same period in the prior year.
Provision for Income Taxes
The effective tax rate for the first nine months of 2022 was 19.6% compared to 20.5% for the same period last year.
Financial Condition and Liquidity
Total debt at the end of the first nine months of 2022 was $106.7 million, an increase of $49.2 million from December 25, 2021. The increase in debt was largely driven by the funding of the Brunswick Billiards acquisition completed in January of 2022. The following schedule summarizes the Company’s total debt:
|
In thousands |
October 1, 2022 |
December 25, |
October 2, 2021 |
|||||||||
|
Current portion of long-term debt |
$ | 7,143 | $ | 7,143 | $ | 7,143 | ||||||
|
Long term debt |
99,568 | 50,396 | 51,874 | |||||||||
|
Total Debt |
$ | 106,711 | $ | 57,539 | $ | 59,017 | ||||||
As a percentage of stockholders’ equity, total debt was 67.8%, 39.2% and 40.8% at October 1, 2022, December 25, 2021, and October 2, 2021, respectively.
On January 21, 2022, the Company entered into an Amended and Restated Credit Agreement (“Restated Credit Agreement”) with its issuing bank, JP Morgan Chase Bank, N.A. (“Chase”), and the other lenders identified in the Restated Credit Agreement (collectively, the “Lender”). Under the terms of the Restated Credit Agreement, Old National Bank has been added as a Lender. The Lenders have now made available to the Company a senior revolving credit facility with increased maximum availability of $65.0 million (the “Revolving Facility”), up from $50.0 million, plus an accordion feature that would allow borrowings up to $90.0 million under the Revolving Facility subject to certain terms and conditions. The maturity date of the revolving credit facility was extended to January 21, 2027. The Company may prepay the Revolving Facility, in whole or in part, and reborrow prior to the revolving loan maturity date. The Restated Credit Agreement further extended the maturity date for the term loan facility to January 21, 2027.
Each loan bears interest at the Adjusted LIBO Rate for the interest period in effect plus the Applicable Rate. Applicable Rate means the applicable rate per annum set forth below, based upon Escalade’s Funded Debt to Adjusted Ratio as of the most recent determination date:
|
Funded Debt to EBITDA Ratio |
Revolving |
Revolving |
Letter of |
Commitment Fee Rate |
||||||||||||
|
Category 1 Greater than or equal to 2.50 to 1.0 |
0.25 | % | 2.00 | % | 2.00 | % | 0.30 | % | ||||||||
|
Category 2 Greater than or equal to 1.50 to 1.0 but less than 2.50 to 1.0 |
-0- | 1.75 | % | 1.75 | % | 0.25 | % | |||||||||
|
Category 3 Less than 1.50 to 1.0 |
(0.25% | ) | 1.50 | % | 1.50 | % | 0.20 | % | ||||||||
The Applicable Rate is determined as of the end of each quarter based upon the Company’s annual or quarterly consolidated financial statements and shall be effective during the period commencing the date of delivery to the agent.
In addition to the increased revolving borrowing amount and extended maturity dates, other significant changes reflected in the Restated Credit Agreement included: specifying that Indian’s acquisition of the assets of the Brunswick Billiards business is a permitted acquisition; providing a $7.5 million swingline commitment by Chase; replacing LIBOR with the replacement benchmark secured overnight financing rate as previously contemplated; and adjustments to certain financial covenants relating to the fixed charge coverage ratio. Escalade’s indebtedness under the Restated Credit Agreement continues to be collateralized by liens on all of the present and future equity of each of Escalade’s domestic subsidiaries and substantially all of the assets of the Company (excluding real estate). Each direct and indirect domestic subsidiary of Escalade and Indian has secured its guaranty of indebtedness incurred under the Revolving Facility with a first priority security interest and lien on all of such subsidiary’s assets. Escalade, Indian and all of the domestic subsidiaries entered into an Amended and Restated Pledge and Security Agreement dated January 21, 2022 in favor of the Lender to continue the existing liens, previously existing under the original pledge and security agreements entered into on April 30, 2009, as amended, and thereafter for subsidiaries created or acquired after that date. The obligations, guarantees, liens and other interests granted by Escalade, Indian, and their domestic subsidiaries continue in full force and effect.
On July 18, 2022, the Company entered into the First Amendment to the Restated Credit Agreement. Under the terms of the First Amendment, the Lender increased the maximum availability under the senior revolving credit facility from $65.0 million to $75.0 million pursuant to the accordion feature in the Restated Credit Agreement. The First Amendment also adjusted the funded debt to EBITDA ratio financial covenant to 3:00 to 1:00 as of the end of the Company’s third and fourth fiscal quarters of 2022.
On October 26, 2022, the Company entered into the Second Amendment ("Second Amendment”) to the Restated Credit Agreement. Under the terms of the Second Amendment, the Lender increased the maximum availability under the senior revolving credit facility from $75.0 million to $90.0 million pursuant to the accordion feature in the Restated Credit Agreement. The Second Amendment adjusted the funded debt to EBITDA ratio financial covenant to 3:25 to 1:00 as of the end of the Company’s third and fourth fiscal quarters of 2022 and 3:00 to 1:00 as of the end of the Company’s first fiscal quarter of 2023. The Second Amendment also modified the EBITDA definition to permit add-backs of a) up to $2.0 million for disposition related expenses; and b) up to $2.0 million for unusual or non-recurring expenses which are incurred prior to the end of fiscal year 2023 and which are subject to the approval of the Administrative Agent.
As of October 1, 2022, the outstanding principal amount of the term loan was $41.7 million and total amount drawn under the Revolving Facility was $65.0 million.
The Company funds working capital requirements, shareholder dividends, and stock repurchases through operating cash flows and revolving credit agreements with its Lenders. The Company expects that cash generated from its 2022 operations and its access to adequate levels of revolving credit will provide it with sufficient cash flows for its operations and 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.
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 third quarter of 2022.
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 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None.
Item 1A. RISK FACTORS.
In addition to the other information set forth in this report, you should carefully consider the risks and uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 25, 2021, as updated in our Quarterly Report on Form 10-Q for the fiscal quarter ended July 9, 2022. These risks and uncertainties could materially and adversely affect our business, consolidated financial condition, results of operations, or cash flows. Our operations could also be affected by additional risks or uncertainties that are not presently known to us or that we currently do not consider material to our business. As of the date of this filing, there have been no material changes in our risk factors from those disclosed in the above-referenced Form 10-K and Form 10-Q, which risk factors are incorporated herein by reference.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
c) Issuer Purchases of Equity Securities
|
Period |
(a) Total |
(b) Average |
(c) Total Number |
(d) Maximum Number (or Approximate Dollar |
|
Share purchases prior to 7/9/2022 under the current repurchase program. |
2,153,132 |
$13.38 |
2,153,132 |
$4,153,252 |
|
Third quarter purchases: |
||||
|
7/10/2022–8/6/2022 |
None |
None |
No Change |
No Change |
|
8/7/2022-9/3/2022 |
None |
None |
No Change |
No Change |
|
9/4/2022-10/1/2022 |
None |
None |
No Change |
No Change |
|
Total share purchases under the current program |
2,153,132 |
$13.38 |
2,153,132 |
$4,153,252 |
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. In December 2020, the Board of Directors increased the stock repurchase program to $15,000,000. From its inception date through October 1, 2022, the Company has repurchased 2,153,132 shares of its common stock under this repurchase program for an aggregate price of $28,812,686. The repurchase program has no termination date and there have been no share repurchases that were not part of a publicly announced program.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
Item 5. OTHER INFORMATION.
None.
Item 6. EXHIBITS
|
Number |
Description |
|
3.1 |
|
|
3.2 |
Amended By-laws of Escalade, Incorporated, as amended August 10, 2022. |
|
10.1 |
Second Amendment dated October 26, 2022 to the Amended and Restated Credit Agreement dated as of January 21, 2022 among Escalade, Incorporated, Indian Industries, Inc., each of their domestic subsidiaries, and JPMorgan Chase Bank, N.A., as Administrative Agent (without exhibits and schedules, which Escalade has determined are not material). Incorporated by reference from the Company’s Current Report on Form 8-K filed on October 27, 2022. |
|
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 |
|
|
32.2 |
|
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
101.INS |
Inline XBRL Instance Document |
|
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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: October 27, 2022 | /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 3.2
AMENDED BY-LAWS
OF
ESCALADE, INCORPORATED
ARTICLE I.
OFFICES
The registered office of Escalade, Incorporated (hereinafter referred to as the “Corporation”) shall be located in the City of Evansville, County of Vanderburgh, State of Indiana. The Corporation may establish or discontinue, from time to time, such other offices and such other places of business within or without the State of Indiana as may be deemed proper for the conduct of the Corporation’s business.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting. An annual meeting of the Corporation’s stockholders shall be held each year on such date and hour as shall be determined by the Board of Directors and designated in the notice of such annual meeting provided in accordance with Article II, Section 4 and applicable law. Failure to hold an annual meeting of stockholders at such designated time shall not affect the validity of any corporate action of the Corporation.
Section 2. Special Meetings. In addition to such special meetings as are provided for by law or by the Articles of Incorporation, special meetings of the holders of any class or series or all classes or series of the Corporation’s stock may be called at any time by the Board of Directors, and special meetings of the holders of the common stock of the Corporation (hereinafter called the “Common Stock”) shall be called by the Secretary upon the written request, stating the purpose or purposes of any such meeting, of the holders of the Common Stock who hold of record collectively at least ten percent (10%) of the outstanding shares of Common Stock. Unless limited by law, the Articles of Incorporation, these By-Laws, or by the terms of the notice thereof, any and all business may be transacted at any special meeting of stockholders.
Section 3. Place of Meetings. Meetings of the stockholders shall be held at such place within or without the State of Indiana, or may be held solely by means of remote communication, as shall be designated by the Board of Directors.
Section 4. Notice of Meetings. Except as otherwise provided by law, notice of each meeting of stockholders shall be given either by delivering a notice personally or mailing a notice to each stockholder of record entitled thereto. If mailed, the notice shall be directed to the stockholder in a postage-prepaid envelope at his address as it appears on the stock books of the Corporation, unless, prior to the time of mailing, the Secretary shall have received from any such stockholder a written request that notices intended for him be mailed to some other address, in which case notices intended for such stockholder shall be mailed to the address designated in such request. Notice of each meeting of stockholders shall be in such form as is approved by the Board of Directors and shall state the purpose or purposes for which the meeting is called, the date and hour when and the place where it is to be held, and shall be delivered personally or mailed not less than ten (10) nor more than sixty (60) days before the day of the meeting.
Section 5. Waiver of Notice. Anything herein contained to the contrary notwithstanding, notice of any meeting of stockholders shall not be required as to any stockholder who shall attend such meeting in person or by proxy, and who shall not have attended such meeting for the express purposes of objecting, at the beginning of such meeting, to the transaction of any business because such meeting was not lawfully called or convened, or who shall, or whose proxy or attorney duly authorized shall, sign a written waiver thereof, whether before or after the time stated therein.
Section 6. Organization. The Chairman of the Board shall act as chairman at all meetings of stockholders at which he is present, and as such chairman shall call such meetings of stockholders to order and preside thereat. If the Chairman of the Board shall be absent from any meeting of stockholders, the duties otherwise provided in this Section 6 of Article II to be performed by him at such meeting shall be performed at such meeting by the officer prescribed in Article VI hereof. If no such officer is present at such meeting, any stockholder or the proxy of any stockholder entitled to vote at the meeting may call the meeting to order and a chairman shall be elected who shall preside thereat. The Secretary of the Corporation shall act as secretary at all meetings of the stockholders, but in his absence the chairman of the meeting may appoint any person present to act as secretary of the meeting.
Section 7. Inspectors. Except as otherwise provided by law or by the Articles of Incorporation, all votes by ballot at any meeting of stockholders shall be conducted by three (3) inspectors who shall be appointed for the purpose by the chairman of the meeting. The inspectors shall decide upon the qualifications of voters, count the votes and declare the result.
Section 8. Fixing Date for Determination of Stockholders of Record; List of Stockholders Entitled to Vote. Nothing herein contained shall be construed to enlarge the voting rights of any stockholder of the Corporation as provided by the Articles of Incorporation or the laws of the State of Indiana. The Board of Directors may fix a date not more than seventy (70) days prior to the date of the meeting of the stockholders (or if not fixed by the Board, then on the close of business on the day before the first notice is delivered to stockholders), nor more than seventy (70) days prior to the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose without a meeting, nor more than seventy (70) days prior to any other action specified below, as a record date for the determination of the stockholders entitled to notice of, and to vote, at such meeting or any adjournment thereof, or to give such consent or express such dissent, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed, shall be entitled to notice of and to vote at such meeting and any adjournment thereof, or entitled to give such consent or express such dissent, or entitled to receive payment of such dividend or other distribution or allotment of such rights, or entitled to exercise such rights in respect of any change, conversion or exchange of stock or for the purpose of such other lawful action as the case may be, notwithstanding any transfer of stock on the books of the Corporation after any such record date fixed as aforesaid. The Secretary shall prepare and make or cause to be prepared and made, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order and showing the address of each such stockholder and the number of shares registered in the name of each such stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place, specified in the notice of the meeting, within the city where the meeting is to be held, or at the place where the meeting is to be held. Such list shall be produced and kept at the time and place of meeting during the whole time thereof, and subject to the inspection of any stockholder who may be present.
Section 9. Quorum and Adjournment. The holders of a majority of the shares of stock entitled to vote at any meeting on every matter that is to be voted on shall constitute a quorum at such meeting of the stockholders. In the absence of a quorum, the holders of a majority of such shares of stock present in person or by proxy may adjourn any meeting, from time to time, until a quorum shall attend. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called. Except as otherwise provided by law, no notice of any adjourned meeting need be given other than by announcement at the meeting that is being adjourned.
Section 10. Order of Business. The order of business at all meetings of stockholders shall be determined by the chairman of the meeting or as otherwise determined by vote of the holders of a majority of the shares of stock present in person or by proxy and entitled to vote on every matter that is to be voted on.
Section 11. Vote of Stockholders. Except as otherwise permitted by law, by the Articles of Incorporation or by Section 12 of this Article II, all action by stockholders shall be taken at a stockholders’ meeting. Every stockholder of record, as determined pursuant to Section 8 of this Article II, and who is entitled to vote, shall be entitled at every meeting of the stockholders to one (1) vote for every share of stock standing in his name on the books of the Corporation. Every stockholder entitled to vote shall have the right to vote at a meeting of the stockholders or to express consent or dissent to corporate action in writing without a meeting in person or by proxy duly appointed by an instrument in writing subscribed by such stockholder and executed not more than three (3) years prior to the meeting, unless the instrument provides for a longer period. Except as otherwise provided by law or by the Articles of Incorporation, no vote on any question upon which a vote of the stockholders may be taken need be by ballot unless the chairman of the meeting shall determine that it shall be by ballot or the holders of a majority of the shares of stock present in person or by proxy and entitled to participate in such vote shall so demand. In a vote by ballot, each ballot shall state the number of shares voted and the name of the stockholder or proxy voting. All elections of directors shall be by a plurality vote and, except as otherwise provided by law, by the Articles of Incorporation or by Section 14 of Article III hereof, all other elections and all questions shall be decided by the vote of the holders of a majority of the shares of stock present in person or by proxy at the meeting and entitled to vote in the election or on the question.
Section 12. Consent of Stockholders in Lieu of Meeting. Except as otherwise provided by law or by the Articles of Incorporation, whenever the vote of stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action, the meeting, the notice thereof and the vote of the stockholders may be dispensed with, if a consent in writing, setting forth such action so taken, shall be signed by all the holders of outstanding stock of the Corporation entitled to vote thereon.
Section 13. Attendance at Stockholders’ Meetings. Any stockholder of the Corporation who is not entitled to notice of, or to vote at, a meeting of stockholders of the Corporation may nevertheless attend any such meeting upon receipt of a written invitation from the Board of Directors of the Corporation.
Section 14. Notice of Nominations for Election to the Board of Directors.
(a) Nominations of any person for election to the Board of Directors at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (i) by or at the direction of the Board of Directors, including by any committee or persons appointed by the Board of Directors, or (ii) by a stockholder who (A) was a stockholder of record (and, with respect to any beneficial owner, if different, on whose behalf such nomination is proposed to be made, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in this Section 14 and at the time of the meeting, (B) is entitled to vote at the meeting, and (C) has complied with this Section 14 as to such nomination. The foregoing clause (ii) shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board of Directors at an annual meeting or special meeting regardless of whether or not such stockholder intends to or does conduct its own proxy solicitation with respect to such nomination.
(b) Without qualification, for a stockholder to make any nomination of a person or persons for election to the Board of Directors at stockholder’s meeting, the stockholder must provide timely notice thereof in writing in proper form to the Secretary of the Corporation. In the case of an annual meeting of stockholders, to be timely, a stockholder’s notice must be delivered to the Secretary at the principal executive office of the Corporation not less than ninety (90) days prior to the first anniversary of the preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to such anniversary date or delayed more than sixty (60) days after such anniversary date then to be timely such notice must be received by the Corporation no later than the later of ninety (90) days prior to the date of the meeting or the tenth day following the day on which public disclosure of the date of the meeting was made. In the case of a special meeting of stockholders, to be timely, a stockholder’s notice for nomination must be delivered to the Secretary at the principal executive office of the Corporation by the tenth day following the date of public disclosure of the date of such meeting. In no event shall any adjournment of an annual or special meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice described above.
(c) To be in proper form, a stockholder’s notice to the Secretary shall set forth:
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(i) |
as to each person whom the stockholder proposes to nominate for election or reelection as a director, (A) the name, age, business address and residence address of such person; (B) the principal occupation or employment of such person for the past five years; (C) the class and number of the Corporation’s shares which are beneficially owned by such person; (D) a description of any arrangement or understanding between each person so proposed and the stockholder(s) making such nomination with respect to such person’s proposal for nomination and election as a director and actions to be proposed or taken by such person if elected as a director; (E) the written consent of each person so proposed to serve as a director if nominated and elected as a director and (F) such other information regarding each such person as would be required under the proxy solicitation rules of the Securities and Exchange Commission if proxies were to be solicited for the election as a director of each person so proposed. |
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(ii) |
As to the stockholder(s) giving the notice, (A) the name and record address for each such stockholder, (B) the class and number of the Corporation’s shares which are beneficially owned by such stockholder(s) |
(d) Only such persons who are nominated in accordance with the procedures set forth in this Section 14 shall be eligible to serve as directors of the Corporation. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 14, and if he or she should so determine, he or she shall so declare such determinate to the meeting and the defective nomination shall be disregarded.
Section 15. Notice of Stockholder Business.
(a) At any meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who (A) was a stockholder of record (and, with respect to any beneficial owner, if different, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in this Section 15 and at the time of the meeting, (B) is entitled to vote at the meeting, and (C) has complied with this Section 15 as to such proposal. The foregoing clause (ii) shall be the exclusive means for a stockholder to propose any business at any stockholder meeting (except for a stockholder nomination of a person for election as a director, which business is subject in its entirety to Article II, Section 14 hereof) regardless of whether or not such stockholder intends or seeks the inclusion of such proposal in the Corporation’s proxy statement for such meeting. For business to be properly brought before a stockholder meeting by a stockholder, the stockholder must provide timely notice thereof in writing in proper form to the Secretary of the Corporation. In the case of an annual meeting of stockholders, to be timely, a stockholder’s notice must be delivered to the Secretary at the principal executive office of the Corporation not less than ninety (90) days prior to the first anniversary of the preceding year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to such anniversary date or delayed more than sixty (60) days after such anniversary date then to be timely such notice must be received by the Corporation no later than the later of ninety (90) days prior to the date of the meeting or the tenth day following the day on which public announcement of the date of the meeting was made. In the case of a special meeting of stockholders, to be timely, a stockholder’s notice for nominations must be delivered to the Secretary at the principal executive office of the Corporation by the tenth day following the date of public disclosure of the date of such meeting. In no event shall any adjournment of an annual or special meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice described above.
(b) To be in proper form, a stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting: (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (ii) the name and record address for each stockholder proposing such business, and (iii) the class and number of the Corporation’s shares which are beneficially owned by such stockholder(s) and any material interest of the stockholder in such business.
(c) No business shall be conducted at a stockholder meeting except in accordance with the procedures set forth in this Section 15. The presiding officer of the meeting shall, if the facts warrant, determine business was not properly brought before the meeting in accordance with this Section 15, and if he or she should so determine, he or she shall so declare such determination to the meeting and any such business shall not be transacted.
ARTICLE III.
BOARD OF DIRECTORS
Section 1. Election and Term. Commencing at the annual meeting of shareholders that is held in calendar year 2015, and except as otherwise provided by law or by the Articles of Incorporation and subject to these By-Laws, Directors shall be elected at the annual meeting of shareholders to serve until the next annual meeting of shareholders and until their successors are elected and qualified.
Effective as of July 29, 2009, the classes and terms of Directors shall not be governed by Section 23-1-33-6(c) of the Indiana Business Corporation Law.”
Section 2. Number. The number of directors may be fixed from time to time by action of the Board of Directors but shall not be less than five (5) or more than nine (9). A majority of the Board may fix or change the number of directors from time to time within the specified range.
Section 3. General Powers. The Board of Directors may exercise all the powers of the Corporation and do all lawful acts and things other than those powers which are reserved to the stockholders by law, by the Articles of Incorporation or by these By-Laws. Specifically, the business, properties and affairs of the Corporation shall be managed by the Board of Directors, which, without limiting the generality of the foregoing, shall have the power to elect and appoint the officers of the Corporation, to appoint and direct agents, to grant general or limited authority to officers, employees and agents of the Corporation to make, execute and deliver contracts and other instruments and documents in the name and on behalf of the Corporation, without specific authority in each case, and to appoint committees, the membership of which may consist of such persons as may be designated by the Board of Directors whether or not any of such persons is then a director of the Corporation, and which committees so appointed may advise the Board of Directors with respect to any matters relating to the conduct of the Corporation’s business.
Section 4. Place of Meetings. Meetings of the Board of Directors may be held at any place, within or without the State of Indiana, from time to time designated by the Board of Directors.
Section 5. Organization Meeting. A newly elected Board of Directors shall meet and organize as soon as practicable after each annual meeting of stockholders, at the place at which such meeting of stockholders took place, without notice of such meeting, provided a majority of the whole Board of Directors is present. If such a majority is not present, such organization meeting may be held at any other time or place which may be specified in a notice given in the manner provided in Section 7 of this Article III for special meetings of the Board of Directors, or in a waiver of notice thereof.
Section 6. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times as may be determined by resolution of the Board of Directors and no notice shall be required for any regular meeting. Except as otherwise provided by law, any business may be transacted at any regular meeting of the Board of Directors. Members of the Board of Directors may participate in any meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting in such manner shall constitute presence in person at such meeting.
Section 7. Special Meetings; Notice and Waiver of Notice. Special meetings of the Board of Directors shall be called by the Secretary on the request of the Chief Executive Officer, or on the request in writing of any two (2) directors stating the purpose or purposes of such meeting. Notice of any special meeting shall be in a form approved by the Chief Executive Officer, or if the meeting is called pursuant to the request of two directors and there shall be a failure to approve the form of notice as aforesaid, then in form approved by such directors. Notices of special meetings shall be mailed to each director, addressed to him at his residence or usual place of business not later than seven (7) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph or cablegram or delivered personally, not later than two (2) days before such day of meeting. Notice of any meeting of the Board of Directors need not be given to any director if he shall sign a written waiver thereof either before or after the time stated therein, or if he shall attend such meeting and shall not have attended such meeting for the express purpose of objecting, at the beginning of such meeting, to the transaction of any business because such meeting was not lawfully called or convened; and any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given, if all the members shall be present thereat. Unless limited by law, by the Articles of Incorporation, by these By-Laws, or by the terms of the notice thereof, any and all business may be transacted at any special meeting.
Section 8. Organization. The Chairman of the Board shall preside at all meetings of the Board of Directors at which he is present. If the Chairman of the Board shall be absent from any meeting of the Board of Directors, the duties otherwise provided in this Section 8 of Article III to be performed by him at such meeting shall be performed at such meeting by the officer prescribed by Article VI hereof. If no such officer is present at such meeting, one of the directors present shall be chosen by the members of the Board of Directors present to preside at such meeting. The Chairman of the Board shall designate an officer to act as the secretary at all meetings of the Board of Directors and in his absence a temporary secretary shall be appointed by the chairman of the meeting.
Section 9. Quorum and Manner of Acting. Except as otherwise provided by law, at every meeting of the Board of Directors one-third (1/3) of the total number of Directors shall constitute a quorum but in no event shall a quorum be constituted by less than two (2) directors. Except as otherwise provided by law, or by these By-Laws, the act of a majority of the directors present at any such meeting, at which a quorum is present, shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present may adjourn any meeting, from time to time, until a quorum is present. No notice of any adjourned meeting need be given other than by announcement at the meeting that it is being adjourned.
Section 10. Voting. On any question on which the Board of Directors shall vote, the names of those voting and their votes shall be entered in the minutes of the meeting when any member of the Board of Directors so requests.
Section 11. Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or the committee.
Section 12. Resignations. Any director may resign at any time either by oral tender of resignation at any meeting of the Board of Directors or by such tender to the Chairman of the Board or the President or by giving written notice thereof to the Corporation. Any resignation shall be effective immediately unless a date certain is specified or is conditioned upon the happening of a specified event(s). If a resignation is conditioned upon failing to receive a specified vote for election as a director, such resignation may be irrevocable. Acceptance of any resignation shall not be necessary to make it effective, unless the resignation is tendered subject to such acceptance.
Section 13. Removal of Directors. No director shall be removed without cause, during his term of office. Any director may be removed, for cause, at any time, by action of the directors or of the holders of record of a majority of the outstanding shares of stock entitled to vote thereon at a meeting of the holders of such shares, and the vacancy in the Board of Directors caused by such removal may be filled by action of such stockholders at such meeting or at any subsequent meeting or by the remaining directors as allowed by law.
Section 14. Filling of Vacancies Not Caused by Removal. Except as otherwise provided by law, in case of any increase in the numbers of directors, or of any vacancy created by death, resignation or otherwise, the additional director or directors may be elected, or, as the case may be, the vacancy or vacancies may be filled either (a) by the Board of Directors at any meeting by affirmative vote of a majority of the remaining directors though the remaining directors be less than the quorum provided for by this Article III, or (b) by the holders of the Common Stock entitled to vote thereon, either at an annual meeting of stockholders or at a special meeting of such holders called for the purpose. The term of a director elected or selected to fill a vacancy shall expire at the end of the term for which such director’s predecessor was elected, or if the vacancy arises because of an increase in the size of the board of directors, at the end of the term specified at the time of election or selection, and until their successors are elected and qualify.
Section 15. Director’s Compensation. Each director shall be entitled to reimbursement for his expenses incurred in attending meetings or otherwise incurred in connection with his attention to the business of the Corporation. Each director, for his services, as a director and as a member of any committee of the Board of Directors, shall also be entitled to receive such compensation as the Board of Directors shall from time to time fix. Such compensation may be a salary or a fee for attendance at a meeting of the Board of Directors or both.
Section 16. Transactions by Directors. A director shall not be disqualified from dealing or contracting with the Corporation, as a vendor, purchaser, employee, agent or otherwise; nor shall any transaction or contract between the Corporation and one or more of its directors, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors are directors or officers, or have a financial interest shall be void or voidable solely for the reason, or solely because such director is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, provided:
(1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum (but at least two directors); or
(2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders.
Nor shall any such director be accountable or responsible to the Corporation for or in respect to any such transaction or contract of the Corporation or for any gains or profits realized by him by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer is interested in such transaction or contract; and any such director, common or interested, may be counted in determining the presence of a quorum at any meeting of the Board of Directors or committee thereof which shall authorize or take action in respect to any such contract, or transaction, including the establishment of any payment of compensation to such director and may vote to authorize, ratify or approve any such contract or transaction, including the establishment of any payment of compensation to such director, with like force and effect as if he or any firm of which he is a member, or any corporation of which he is a shareholder, director or officer were not interested in or did not have a relationship to such transaction or contract or compensation, as the case may be.
Section 17. Indemnification.
(a) Indemnification Pursuant to Statute. The Corporation shall indemnify its directors, officers, trustees, employees and agents (and the heirs, executors or administrators of such person) against any liability, potential or actual, in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, arising out of or related to such person’s position as a director, officer, employee, employee benefit plan administrator or fiduciary, or agent of the corporation or of another corporation, partnership, joint venture, trust or other enterprise at the request of the corporation, and against any expenses incurred in defending against any such liability to no less than the full extent as required or permitted by Section 23-1-37 of the Indiana General Corporation Act or any successor thereto as in effect at the time indemnification is requested or required (the “Indemnification Statute”), as determined by any persons or entities authorized under the Indemnification Statute of this Section 17 to make a determination whether indemnification is proper.
(b) Insurance. The Corporation, at its expense may purchase and maintain insurance or similar protection (including without limitation a trust fund, letter of credit or self-insurance) to protect itself and any such director, officer, trustee, employee or agent of the Corporation or another corporation, partnership, joint venture, trust, or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the law of the State of Indiana.
(c) Indemnification Not Exclusive. The indemnification authorized by this Section 17 shall not be exclusive of, and shall be in addition to, any rights of indemnification now existing or hereafter granted to any person under any statute, provision of the Articles of Incorporation, By-Laws, agreement, vote or other action of the Corporation’s stockholders or disinterested directors or otherwise.
(d) Maximum Indemnification. It is the intention of this Section 17 to give the persons covered hereunder the maximum indemnification permitted under the law of the State of Indiana as it exists at the time any such person seeks indemnification hereunder.
ARTICLE IV.
EXECUTIVE COMMITTEE
Section 1. Constitution and Powers. The Board of Directors may, by resolution adopted by affirmative vote of two-thirds (2/3) of the whole Board of Directors, appoint an Executive Committee, which shall have and may exercise, during the intervals between the meetings of the Board of Directors, all the powers of the Board of Directors in the management of the business, properties and affairs of the Corporation, including authority to take all action provided by these By-Laws to be taken by the Board of Directors; provided, however, that the foregoing is subject to the applicable provisions of law and shall not be construed as authorizing action by the Executive Committee with respect to any action which pursuant to Section 14(a) of Article III, this Section 1 and Section 8 of this Article IV, Section 1 of Article V and Section 3 and Section 6 of Article VI, is required to be taken by vote of a specified proportion of the whole Board of Directors, or as authorizing the Executive Committee to declare any dividend or to amend these By-Laws. The Executive Committee shall consist of such number of directors as may from time to time be designated by the Board of Directors, but shall not be less than three (3) or more than seven (7) directors. So far as practicable, the members of the Executive Committee shall be appointed at the organization meeting of the Board of Directors in each year, and unless sooner discharged by affirmative vote of a majority of the whole Board of Directors, shall hold office until the next annual meeting of the stockholders and until their respective successors are appointed. All acts done and powers conferred by the Executive Committee shall be deemed to be and may be certified as being done or conferred under authority of the Board of Directors.
Section 2. Place of Meeting. Meetings of the Executive Committee may be held at any place, within or without the State of Indiana, from time to time designated by the Board of Directors or the Executive Committee.
Section 3. Meetings; Notice and Waiver of Notice. Regular meetings of the Executive Committee shall be held at such times as may be determined by resolution either of the Board of Directors or the Executive Committee and no notice shall be required for any regular meeting. Members of the Executive Committee may participate in any meeting of the Executive Committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting in such manner shall constitute presence in person at such meeting. Special meetings of the Executive Committee shall be called by the Secretary upon the request of any member thereof. Notice of any special meeting of the Executive Committee shall be in form approved by the Chairman of the Executive Committee, or if the meeting is called pursuant to the request of some other member of the Executive Committee and there shall be a failure to approve the form of notice as aforesaid, then in the form approved by such member. Notices of special meetings shall be mailed to each member, addressed to him at his residence or usual place of business, not later than two (2) days before the day which the meeting is to be held, or shall be sent to him at such place by telegraph, or be delivered personally or by telephone, not later than the day before such day of meeting. Notices of such meeting need not be given to any member of the Executive Committee, however, if waived by him as provided in Section 7 of Article III, the provisions of such Section 7 with respect to waiver of notice of meetings of the Board of Directors applying to meetings of the Executive Committee as well.
Section 4. Organization. The Board of Directors shall designate a Chairman of the Executive Committee who shall preside at all meetings of the Executive Committee at which he is present. In the absence of the Chairman of the Executive Committee, one of the members present shall be chosen by the members of the Executive Committee present to preside at such meeting. The Chairman of the Executive Committee shall designate a member of said Committee to act as secretary at all meetings of the Executive Committee and in his absence a temporary secretary shall be appointed by the chairman of the meeting.
Section 5. Quorum and Manner of Acting. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present, shall be the act of the Executive Committee. In the absence of a quorum, a majority of the members of the Executive Committee present may adjourn any meeting, from time to time, until a quorum is present. No notice of any adjourned meeting need be given other than by announcement at the meeting that it is being adjourned. The provisions of Section 11 of Article III with respect to action taken by a committee of the Board of Directors without a meeting shall apply to action taken by the Executive Committee.
Section 6. Voting. On any question on which the Executive Committee shall vote, the names of those voting and their votes shall be entered in the minutes of the meeting when any member of the Executive Committee so requests.
Section 7. Records. The Executive Committee shall keep minutes of its acts and proceedings, which shall be submitted at the next regular meeting of the Board of Directors, and any action taken by the Board of Directors with respect thereto shall be entered in the minutes of the Board of Directors.
Section 8. Vacancies. Any vacancy among the appointed members of the Executive Committee may be filled by affirmative vote of a majority of the whole Board of Directors.
ARTICLE V.
OTHER COMMITTEES
Section 1. Appointing Other Committees. The Board of Directors may from time to time by resolution adopted by affirmative vote of a majority of the whole Board of Directors, appoint other committees of the Board of Directors which shall have such powers and duties as the Board of Directors may properly determine. No such other committee of the Board of Directors shall be composed of fewer than three (3) directors.
Section 2. Time and Place of Meetings; Manner of Acting; Notice and Wavier of Notice. Meetings of such committees of the Board of Directors may be held at any place, within or without the State of Indiana, from time to time designated by the Board of Directors, or the committee in question. Regular meetings of any such committee shall be held at such times as may be determined by resolution of the Board of Directors or the committee and no notice shall be required for any regular meeting. Members of such committee may participate in any meeting of such committee by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting in such manner shall constitute presence in person at such meeting. A special meeting of any such committee shall be called by resolution of the Board of Directors, or by its secretary upon the request of any member of the committee. The provisions of Section 3 of Article IV with respect to notice and waiver of notice of special meetings of the Executive Committee shall also apply to all special meetings of other committees of the Board of Directors. Any such committee may make rules for holding and conducting its meetings and shall keep minutes thereof. The provisions of Section 11 of Article III with respect to action taken by a committee of the Board of Directors without a meeting shall apply to action taken by any such committee.
ARTICLE VI.
THE OFFICERS
Section 1. Officers. The elected officers of the Corporation shall be a Chairman of the Board (if desired), a Vice-Chairman of the Board (if desired), a President, one or more Vice-Presidents, a Secretary and a Treasurer. The elected officers shall be elected by the Board of Directors. The Chairman and Vice-Chairman of the Board, shall be selected from the Directors. The Board of Directors may also appoint one or more Assistant Vice-Presidents, Assistant Secretaries, Assistant Treasurers and such other officers and agents as in their judgment the business of the Corporation may require.
Section 2. Terms of Office; Vacancies. So far as is practicable, all elected officers shall be elected at the organization meeting of the Board of Directors in each year, and, except as otherwise provided in this Article VI, shall hold office until the organization meeting of the Board of Directors in the next subsequent year and until their respective successors are elected and qualify, provided, however, that this Section 2 shall not be deemed to create any contract rights in such offices. All other officers shall hold office during the pleasure of the Board of Directors. If any vacancy shall occur in any office, the Board of Directors may elect or appoint a successor to fill such vacancy for the remainder of the term.
Section 3. Removal of Elected Officers. Any elected officer may be removed at any time, either for or without cause, by affirmative vote of a majority of the whole Board of Directors, at any regular meeting or at any special meeting called for the purpose.
Section 4. Resignations. Any officer may resign at any time, either by oral tender of resignation to the Chairman of the Board or the President or by giving written notice thereof to the Corporation. Any resignation shall be effective immediately unless a date certain is specified for it to take effect and acceptance of any resignation shall not be necessary to make it effective unless such resignation is tendered subject to such acceptance.
Section 5. Officers Holding More Than One Office. Any officer may hold two or more offices the duties of which can be consistently performed by the same person.
Section 6. Chief Executive Officer. The Chief Executive Officer of the Corporation shall be so designated from time to time by vote of a majority of the whole Board of Directors. Subject to the direction and control of the Executive Committee and the Board of Directors he shall have general and active management of the business and affairs of the Corporation, and shall have the responsibility for having all orders of the Executive Committee and the Board of Directors carried into effect. He shall have general authority to execute bonds, deeds and contracts in the name and on behalf of the Corporation, and in general to exercise all the powers generally appertaining to the chief executive officer of a corporation. In the absence of the Chief Executive Officer, his duties shall be performed and his powers may be exercised by the persons so designated by vote of a majority of the whole Board of Directors.
Section 7. The Chairman of the Board, The Vice-Chairman of the Board, The President and Vice-Presidents. The Chairman of the Board, the Vice-Chairman of the Board, the President and Vice-President (or Vice-Presidents) shall perform such duties and have such powers as may from time to time be assigned to them by the Board of Directors or the Executive Committee.
Section 8. The Secretary. The Secretary shall attend to the giving of notice of all meetings of stockholders, shall keep minutes of all proceedings at meetings of the stockholders, and shall perform such other duties as assigned to him by the Board of Directors or the Executive Committee.
Section 9. The Treasurer. The Treasurer shall have the care and custody of all the funds of the Corporation and shall deposit the same in such banks or other depositaries as the Board of Directors, or any officer or officers, or any officer and agent jointly, thereunto duly authorized by the Board of Directors shall, from time to time, direct or approve. He shall keep a full and accurate account of all moneys received and paid on account of the Corporation, and shall render a statement of his accounts whenever the Board of Directors shall require. He shall perform all other necessary acts and duties in connection with the administration of the financial affairs of the Corporation, and shall generally perform all the duties usually appertaining to the affairs of the treasurer of a corporation, including specifically the duty of supervising and causing the timely filing of all federal, state and municipal tax reports and returns and the timely payment of all taxes due to or withheld for such federal, state or local governments. When required by the Board of Directors, he shall give bonds for the faithful discharge of his duties in such sums and with such sureties as the Board of Directors shall approve. In the absence of the Treasurer, such person as shall be designated by the Chief Executive Officer shall perform his duties.
Section 10. Additional Powers and Duties. In addition to the foregoing especially enumerated duties and powers, the several officers of the Corporation shall perform such other duties and exercise such further powers as the Board of Directors may, from time to time, determine or as may be assigned to them by a superior officer.
Section 11. Compensation. The compensation of all officers and directors of the Corporation shall be fixed by the Board of Directors. The compensation of all other employees and agents of the Corporation shall be fixed by the Chief Executive Officer or by such person or persons as shall be designated by him.
ARTICLE VII.
STOCK AND TRANSFERS OF STOCK
Section 1. Stock Certificates; Uncertificated Shares. The stock of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution(s) that some or all of any or all classes or series of stock shall be uncertificated shares. Any such resolution(s) shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Certificates, if any, for shares shall be signed by the Chairman of the Board, the Vice-Chairman of the Board, the Chief Executive Officer, the President or a Vice-President and by the Secretary, Treasurer, an Assistant Secretary or Assistant Treasurer, and sealed with the seal, if any, of the Corporation. Such signatures and/or seal may be a facsimile, engraved or printed. In case any such officer who has signed any such certificate shall have ceased to be such officer before such certificate is delivered by the Corporation, it may nevertheless be issued and delivered by the Corporation with the same effect as if such officer had not ceased to be such at the date of its issue. The certificates representing the stock of the Corporation shall be in such form as shall be approved by the Board of Directors and shall conform to the requirements of the laws of the State of Indiana.
Section 2. Transfers of Stock. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate, or by an attorney lawfully constituted in writing, and upon surrender and cancellation of a certificate or certificates for a like number of shares of the same class or series of stock, with duly executed assignment and power of transfer endorsed thereon or attached thereto, and with such proof of the authenticity of the signatures as the Corporation or its agents may reasonably require. No transfer of stock shall be valid, until such transfer shall have been made upon the books of the Corporation.
Section 3. Lost Certificates. In case any certificate of stock shall be lost, stolen or destroyed, the Board of Directors, in its discretion, or any officer or officers thereunto duly authorized by the Board of Directors, may authorize the issue of a substitute certificate in the place of the certificate so lost, stolen or destroyed; provided, however, that in each case, the applicant for a substitute certificate shall furnish to the Corporation evidence to the Corporation, which it determines in its discretion is satisfactory, of the loss, theft or destruction of such certificate and of the ownership thereof, and also such security or indemnity as may by it be required.
ARTICLE VIII.
CORPORATE SEAL
Section 1. Form. The Board of Directors may adopt a seal of the Corporation in any form that a majority of directors deem appropriate at any time. If the Board so determines, no seal need be adopted.
Section 2. Affixing and Attesting. The seal of the Corporation, if any, shall be in the custody of the Secretary, who shall have the power to affix it to the proper corporate instruments and documents, and who shall attest it. In his absence, it may be affixed and attested by an Assistant Secretary or by the Treasurer, or an Assistant Treasurer, or by any other person or persons as may be designated by the Board of Directors.
ARTICLE IX.
MISCELLANEOUS
Section 1. Fiscal Year. Through and including December 31, 2022, the fiscal year of the Corporation shall end on the last Saturday of December in each year and such fiscal year shall have begun on the day immediately following the last day of the preceding fiscal year. Commencing January 1, 2023 and thereafter, the fiscal year shall begin on January 1 and end on December 31 in each year.
Section 2. Signatures on Negotiable Instruments. All bills, notes, checks or other instruments for the payment of money shall be signed or countersigned by such officers or agents and in such manner as, from time to time, may be prescribed by resolution (whether general or special) of the Board of Directors.
Section 3. References to Articles and Section Numbers and to these By-Laws and Certificate of Incorporation. Whenever in these By-Laws reference is made to an Article or Section number, such reference is to the number of an Article or Section of these By-Laws. Whenever in these By-Laws reference is made to these By-Laws such reference is to these By-Laws as the same may from time to time be amended and whenever reference is made to the Articles of Incorporation, such reference is to the Articles of Incorporation of the Corporation as the same may from time to time be amended.
ARTICLE X.
AMENDMENTS
These By-Laws may be made, altered, amended or repealed, from time to time, at a meeting held for such purpose, by the affirmative vote of a majority of the Board of Directors or without such a meeting by the written consent of all the members of the Board of Directors, or at a meeting held for such purpose by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Corporation on such proposal.
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Walter P. Glazer, Jr., certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Escalade, Incorporated; |
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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; |
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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; |
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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: |
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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; |
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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; |
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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 |
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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 |
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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): |
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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 |
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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: October 27, 2022 | /s/ Walter P. Glazer, Jr. |
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Stephen R. Wawrin, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Escalade, Incorporated; |
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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; |
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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; |
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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: |
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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; |
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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; |
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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 |
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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 |
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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): |
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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 |
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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: October 27, 2022 | /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 October 1, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Walter P. Glazer, Jr., 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:
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(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Walter P. Glazer, Jr.
Chief Executive Officer
October 27, 2022
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 October 1, 2022 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:
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(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(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)
October 27, 2022
Consolidated Condensed Balance Sheets (Current Period Unaudited)-parentheticals (Parentheticals) - USD ($) $ / shares in Thousands, $ in Thousands |
Oct. 01, 2022 |
Dec. 25, 2021 |
Oct. 02, 2021 |
|---|---|---|---|
| Receivables, allowance | $ 729 | $ 457 | $ 636 |
| Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 | 1,000,000 |
| Preferred Stock, Par or Stated Value Per Share (in dollars per share) | $ 0 | $ 0 | $ 0 |
| Preferred Stock, Shares Issued (in shares) | 0 | 0 | 0 |
| Common stock, shares authorized (in shares) | 30,000,000 | 30,000,000 | 30,000,000 |
| Common Stock, No Par Value (in dollars per share) | $ 0 | $ 0 | $ 0 |
| Common Stock, Shares, Issued (in shares) | 13,590,407 | 13,493,332 | 13,557,879 |
| Common stock, shares outstanding (in shares) | 13,590,407 | 13,493,332 | 13,557,879 |
Consolidated Condensed Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
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| Net sales | $ 74,904 | $ 81,298 | $ 241,621 | $ 240,168 |
| Costs and Expenses | ||||
| Cost of products sold | 61,273 | 62,992 | 184,147 | 179,355 |
| Selling, administrative and general expenses | 8,769 | 10,202 | 33,975 | 33,888 |
| Amortization | 642 | 432 | 2,067 | 1,438 |
| Operating Income | 4,220 | 7,672 | 21,432 | 25,487 |
| Other Income (Expense) | ||||
| Interest expense | (954) | (414) | (2,462) | (1,035) |
| Other income (expense) | (22) | 68 | 50 | 124 |
| Income Before Income Taxes | 3,244 | 7,326 | 19,020 | 24,576 |
| Provision for Income Taxes | 286 | 1,360 | 3,735 | 5,042 |
| Net Income | $ 2,958 | $ 5,966 | $ 15,285 | $ 19,534 |
| Earnings Per Share Data: | ||||
| Basic earnings per share (in dollars per share) | $ 0.22 | $ 0.44 | $ 1.13 | $ 1.41 |
| Diluted earnings per share (in dollars per share) | 0.22 | 0.43 | 1.12 | 1.40 |
| Dividends declared (in dollars per share) | $ 0.15 | $ 0.14 | $ 0.45 | $ 0.42 |
Note A - Summary of Significant Accounting Policies |
9 Months Ended |
|---|---|
Oct. 01, 2022 | |
| Notes to Financial Statements | |
| Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] |
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 25, 2021 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 2021 filed with the Securities and Exchange Commission. |
Note B - Seasonal Aspects |
9 Months Ended |
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Oct. 01, 2022 | |
| Notes to Financial Statements | |
| Seasonal Aspects [Text Block] |
Note B ‑ Seasonal Aspects
The results of operations for the three and nine month periods ended October 1, 2022 and October 2, 2021 are not necessarily indicative of the results to be expected for the full year. |
Note C - Inventories |
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Note C ‑ Inventories
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Note D - Fair Values of Financial Instruments |
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| Fair Value Disclosures [Text Block] |
Note D – Fair Values of Financial Instruments
The following methods were used to estimate the fair value of all financial instruments recognized in the accompanying balance sheets at amounts other than fair values.
Cash and Cash Equivalents
Fair values of cash and cash equivalents approximate cost due to the short period of time to maturity.
Long-term Debt
Fair values of long-term debt is estimated based on borrowing rates currently available to the Company for bank loans with similar terms and maturities and determined through the use of a discounted cash flow model.
The following table presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall in accordance with FASB ASC 825 at October 1, 2022, December 25, 2021 and October 2, 2021.
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Note E - Stock Compensation |
9 Months Ended |
|---|---|
Oct. 01, 2022 | |
| Notes to Financial Statements | |
| Share-Based Payment Arrangement [Text Block] |
Note E – Stock Compensation
The fair value of stock-based compensation is recognized in accordance with the provisions of FASB ASC 718, Stock Compensation.
During the nine months ended October 1, 2022 and pursuant to the 2017 Incentive Plan, in lieu of cash payments of director fees, the Company awarded to certain directors 3,886 shares of common stock. During the nine months ended October 1, 2022, the Company awarded 20,000 restricted stock units to directors and 196,254 restricted stock units to employees. The restricted stock units awarded to directors time vest over years one year from grant date and two years from grant date) provided that the director is still a director of the Company at the vest date. Director restricted stock units are subject to forfeiture, except for termination of services as a result of retirement, death or disability, if on the vesting date the director no longer holds a position with the Company. The 2022 restricted stock units awarded to employees time vest over years ( one year from grant, two years from grant and three years from grant) provided that the employee is still employed by the Company on the vesting date.
For the three and nine months ended October 1, 2022, the Company recognized stock based compensation expense of $377 thousand and $1,453 thousand, respectively compared to stock based compensation expense of $229 thousand and $666 thousand for the same periods in the prior year. At October 1, 2022 and October 2, 2021, respectively, there was $1,937 thousand and $865 thousand in unrecognized stock-based compensation expense related to non-vested stock awards.
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Note F - Segment Information |
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| Segment Reporting Disclosure [Text Block] |
Note F ‑ Segment Information
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Note G - Dividend Payment |
9 Months Ended |
|---|---|
Oct. 01, 2022 | |
| Notes to Financial Statements | |
| Dividend Payment Terms [Text Block] |
Note G – Dividend Payment
On September 13, 2022, the Company paid a quarterly dividend of $0.15 per common share to all shareholders of record on September 6, 2022. The total amount of the dividend was approximately $2.0 million and was charged against retained earnings.
On June 7, 2022, the Company paid a quarterly dividend of $0.15 per common share to all shareholders of record on May 31, 2021. The total amount of the dividend was approximately $2.0 million and was charged against retained earnings.
On March 21, 2022, the Company paid a quarterly dividend of $0.15 per common share to all shareholders of record on March 14, 2022 (the amount was funded to the transfer agent by the Company on March 17, 2022). The total amount of the dividend was approximately $2.0 million and was charged against retained earnings.
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Note H - Earnings Per Share |
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| Earnings Per Share [Text Block] |
Note H ‑ Earnings Per Share
The shares used in computation of the Company’s basic and diluted earnings per common share are as follows:
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 2022 and 2021 were zero and 11,900, respectively. |
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Note I - New Accounting Standards and Changes in Accounting Principles |
9 Months Ended |
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Oct. 01, 2022 | |
| Notes to Financial Statements | |
| Accounting Standards Update and Change in Accounting Principle [Text Block] |
Note I – New Accounting Standards and Changes in Accounting Principles
There have been no recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended October 1, 2022, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2021, that are of significance, or potential significance to the Company. |
Note J - Revenue From Contracts With Customers |
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| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Text Block] |
Note J – Revenue from Contracts with Customers
Revenue Recognition – Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our goods at a point in time based on shipping terms and transfer of title. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue.
Gross-to-net sales adjustments – We recognize revenue net of various sales adjustments to arrive at net sales as reported on the statement of operations. These adjustments are referred to as gross-to-net sales adjustments and primarily fall into one of three categories: returns, warranties and customer allowances.
Returns – The Company records an accrued liability and reduction in sales for estimated product returns based upon historical experience. An accrued liability and reduction in sales is also recorded for approved return authorizations that have been communicated by the customer.
Warranties – Limited warranties are provided on certain products for varying periods. We record an accrued liability and reduction in sales for estimated future warranty claims based upon historical experience and management’s estimate of the level of future claims. Changes in the estimated amounts recognized in prior years are recorded as an adjustment to the accrued liability and sales in the current year.
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:
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Note K - Leases |
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| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lessee, Operating Leases [Text Block] |
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 10 years. As of October 1, 2022, 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 is as follows:
Other information about lease amounts recognized in our consolidated financial statements is summarized as follows:
Future minimum lease payments under non-cancellable leases as of October 1, 2022 were as follows:
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Note L - Commitments and Contingencies |
9 Months Ended |
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Oct. 01, 2022 | |
| Notes to Financial Statements | |
| Commitments and Contingencies Disclosure [Text Block] |
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. |
Note M - Acquisition |
9 Months Ended |
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Oct. 01, 2022 | |
| Notes to Financial Statements | |
| Business Combination Disclosure [Text Block] |
Note M – Acquisition
On January 21, 2022, the Company completed its acquisition of the assets constituting the Brunswick Billiards business of Life Fitness, LLC. The purchase price of the acquisition is $35.8 million. The acquisition was funded by cash and the Company’s revolving credit facility. The Company has not yet finalized its final evaluation of the fair value of certain items. The current estimates of fair value for the more significant assets acquired and liabilities assumed were receivables million), inventory million), fixed assets, including building and land million), accounts payable million), other accrued liabilities million), goodwill and other intangible assets million). |
Note N - Debt |
9 Months Ended |
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Oct. 01, 2022 | |
| Notes to Financial Statements | |
| Debt Disclosure [Text Block] |
Note N – Debt
On January 21, 2022, the Company entered into an Amended and Restated Credit Agreement (“Restated Credit Agreement”) with its issuing bank, JP Morgan Chase Bank, N.A. (“Chase”), and the other lenders identified in the Restated Credit Agreement (collectively, the “Lender”). Under the terms of the Restated Credit Agreement, Old National Bank has been added as a Lender. The Lenders have now made available to the Company a senior revolving credit facility with increased maximum availability of $65.0 million (the “Revolving Facility”), up from $50.0 million, plus an accordion feature that would allow borrowings up to $90.0 million under the Revolving Facility subject to certain terms and conditions. The maturity date of the revolving credit facility was extended to January 21, 2027. The Company may prepay the Revolving Facility, in whole or in part, and reborrow prior to the revolving loan maturity date. The Restated Credit Agreement further extended the maturity date for the term loan facility to January 21, 2027.
On July 18, 2022, the Company entered into the First Amendment to the Restated Credit Agreement. Under the terms of the First Amendment, the Lender increased the maximum availability under the senior revolving credit facility from $65.0 million to $75.0 million pursuant to the accordion feature in the Restated Credit Agreement. The First Amendment also adjusted the funded debt to EBITDA ratio financial covenant to to 1:00 as of the end of the Company’s third and fourth fiscal quarters of 2022.
As of October 1, 2022, the outstanding principal amount of the term loan was $41.7 million and total amount drawn under the Revolving Facility was $65.0 million. |
Note O - Subsequent Events |
9 Months Ended |
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Oct. 01, 2022 | |
| Notes to Financial Statements | |
| Subsequent Events [Text Block] |
Note O – Subsequent Events
On October 26, 2022, the Company entered into the Second Amendment ("Second Amendment”) to the Restated Credit Agreement. Under the terms of the Second Amendment, the Lender increased the maximum availability under the senior revolving credit facility from $75.0 million to $90.0 million pursuant to the accordion feature in the Restated Credit Agreement. The Second Amendment adjusted the funded debt to EBITDA ratio financial covenant to to 1:00 as of the end of the Company’s third and fourth fiscal quarters of 2022 and to 1:00 as of the end of the Company’s first fiscal quarter of 2023. The Second Amendment also modified the EBITDA definition to permit add-backs of a) up to $2.0 million for disposition related expenses; and b) up to $2.0 million for unusual or non-recurring expenses which are incurred prior to the end of fiscal year 2023 and which are subject to the approval of the Administrative Agent.
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Significant Accounting Policies (Policies) |
9 Months Ended |
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Oct. 01, 2022 | |
| Accounting Policies [Abstract] | |
| Consolidation, Policy [Policy Text Block] | – 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 25, 2021 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 2021 filed with the Securities and Exchange Commission. |
Note C - Inventories (Tables) |
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| Schedule of Inventory, Current [Table Text Block] |
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Note D - Fair Values of Financial Instruments (Tables) |
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| Fair Value, by Balance Sheet Grouping [Table Text Block] |
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Note F - Segment Information (Tables) |
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| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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Note H - Earnings Per Share (Tables) |
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| Schedule of Weighted Average Number of Shares [Table Text Block] |
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Note J - Revenue From Contracts With Customers (Tables) |
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| Disaggregation of Revenue [Table Text Block] |
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Note K - Leases (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease, Cost [Table Text Block] |
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| Lessee, Operating Lease, Liability, Maturity [Table Text Block] |
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Note C - Inventories - Inventories (Details) - USD ($) $ in Thousands |
Oct. 01, 2022 |
Dec. 25, 2021 |
Oct. 02, 2021 |
|---|---|---|---|
| Raw materials | $ 9,988 | $ 9,142 | $ 10,160 |
| Work in progress | 4,537 | 3,529 | 3,873 |
| Finished goods | 120,432 | 79,711 | 77,722 |
| Inventory, Net, Total | $ 134,957 | $ 92,382 | $ 91,755 |
Note D - Fair Values of Financial Instruments - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Oct. 02, 2022 |
Oct. 01, 2022 |
Dec. 25, 2021 |
Oct. 02, 2021 |
|---|---|---|---|---|
| Cash and cash equivalents | $ 4,000 | $ 4,374 | $ 6,492 | |
| Current portion of long-term debt | 7,143 | 7,143 | 7,143 | |
| Long-term debt | 99,568 | 50,396 | 51,874 | |
| Fair Value, Inputs, Level 1 [Member] | ||||
| Cash and cash equivalents | $ 4,000 | 4,374 | 6,492 | |
| Fair Value, Inputs, Level 2 [Member] | ||||
| Current portion of long-term debt | 7,143 | 7,143 | 7,143 | |
| Long-term debt | $ 99,568 | $ 50,396 | $ 51,874 |
Note F - Segment Information - Segment Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
Dec. 25, 2021 |
|
| Revenues from external customers | $ 74,904 | $ 81,298 | $ 241,621 | $ 240,168 | |
| Operating income (loss) | 4,220 | 7,672 | 21,432 | 25,487 | |
| Net income (loss) | 2,958 | 5,966 | 15,285 | 19,534 | |
| Total assets | 320,324 | 254,156 | 320,324 | 254,156 | $ 251,798 |
| Sporting Goods [Member] | |||||
| Revenues from external customers | 74,904 | 81,298 | 241,621 | 240,168 | |
| Operating income (loss) | 4,661 | 8,087 | 23,026 | 27,049 | |
| Net income (loss) | 2,387 | 5,614 | 14,665 | 18,956 | |
| Total assets | 312,418 | 246,777 | 312,418 | 246,777 | |
| Corporate Segment [Member] | |||||
| Revenues from external customers | 0 | 0 | 0 | 0 | |
| Operating income (loss) | (441) | (415) | (1,594) | (1,562) | |
| Net income (loss) | 571 | 352 | 620 | 578 | |
| Total assets | $ 7,906 | $ 7,379 | $ 7,906 | $ 7,379 | |
Note G - Dividend Payment (Details Textual) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Sep. 13, 2022 |
Mar. 21, 2022 |
Jul. 22, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
|
| Common Stock, Dividends, Per Share, Cash Paid (in dollars per share) | $ 0.15 | $ 0.15 | $ 0.15 | ||||
| Dividends, Common Stock, Cash | $ 2,000 | $ 2,000 | $ 2,000 | $ 2,039 | $ 1,917 | $ 6,115 | $ 5,804 |
Note H - Earnings Per Share (Details Textual) - shares |
9 Months Ended | |
|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 0 | 11,900 |
Note H - Earnings Per Share - Earnings Per Share (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
|
| Weighted average common shares outstanding (in shares) | 13,590 | 13,706 | 13,565 | 13,821 |
| Dilutive effect of stock options and restricted stock units (in shares) | 62 | 102 | 82 | 102 |
| Weighted average common shares outstanding, assuming dilution (in shares) | 13,652 | 13,808 | 13,647 | 13,923 |
Note J - Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
|
| Total Gross Sales | $ 81,457 | $ 89,220 | $ 263,973 | $ 264,349 |
| Returns | 892 | 1,283 | 3,740 | 5,531 |
| Warranties | 663 | 590 | 1,985 | 1,703 |
| Customer Allowances | 4,998 | 6,049 | 16,627 | 16,947 |
| Total Gross-to-Net Sales Adjustments | 6,553 | 7,922 | 22,352 | 24,181 |
| Total Net Sales | 74,904 | 81,298 | 241,621 | 240,168 |
| Mass Merchants [Member] | ||||
| Total Gross Sales | 29,849 | 41,792 | 85,804 | 93,298 |
| Specialty Dealers [Member] | ||||
| Total Gross Sales | 20,298 | 19,170 | 74,631 | 73,347 |
| E-commerce [Member] | ||||
| Total Gross Sales | 26,090 | 25,116 | 87,441 | 86,053 |
| International [Member] | ||||
| Total Gross Sales | 4,032 | 2,259 | 12,643 | 9,182 |
| Other Channels [Member] | ||||
| Total Gross Sales | $ 1,188 | $ 883 | $ 3,454 | $ 2,469 |
Note K - Leases - Lease Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Oct. 01, 2022 |
Oct. 02, 2021 |
Oct. 01, 2022 |
Oct. 02, 2021 |
|
| Operating Lease Cost | $ 393 | $ 433 | $ 1,073 | $ 1,151 |
| Short-term Lease Cost | 658 | 692 | 1,882 | 2,339 |
| Variable Lease Cost | 81 | 101 | 393 | 304 |
| Total Operating Lease Cost | 1,132 | 1,226 | 3,348 | 3,794 |
| Operating Lease – Operating Cash Flows | 100 | 434 | 712 | 1,050 |
| New ROU Assets – Operating Leases | $ 30 | $ 1,189 | $ 7,773 | $ 2,329 |
| Weighted Average Remaining Lease Term – Operating Leases (in years) (Year) | 9 years 3 months 14 days | 3 years 11 months 4 days | 9 years 3 months 14 days | 3 years 11 months 4 days |
| Weighted Average Discount Rate – Operating Leases | 5.00% | 5.00% | 5.00% | 5.00% |
Note K - Leases - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands |
Oct. 01, 2022 |
Dec. 25, 2021 |
Oct. 02, 2021 |
|---|---|---|---|
| Year 1 | $ 146 | ||
| Year 2 | 1,364 | ||
| Year 3 | 1,313 | ||
| Year 4 | 1,294 | ||
| Year 5 | 1,283 | ||
| Thereafter | 6,467 | ||
| Total future minimum lease payments | 11,867 | ||
| Less imputed interest | 2,494 | ||
| Total | 9,373 | ||
| Current operating lease liabilities | 816 | $ 818 | $ 990 |
| Long-term operating lease liabilities | 8,557 | $ 1,387 | $ 1,493 |
| Total | $ 9,373 |
Note N - Debt (Details Textual) $ in Millions |
3 Months Ended | |||
|---|---|---|---|---|
|
Jul. 18, 2022
USD ($)
|
Oct. 01, 2022
USD ($)
|
Jan. 21, 2022
USD ($)
|
Dec. 25, 2021
USD ($)
|
|
| Debt to EBITDA Ratio | 3 | 3.25 | ||
| Term Loan [Member] | ||||
| Long-Term Debt, Gross | $ 41.7 | |||
| Restated Credit Agreement [Member] | Revolving Credit Facility [Member] | ||||
| Line of Credit Facility, Maximum Borrowing Capacity | $ 75.0 | $ 65.0 | $ 50.0 | |
| Line of Credit Facility, Maximum Borrowing Capacity, Accordion Feature | $ 90.0 | |||
| Debt to EBITDA Ratio | 3 | |||
| Amount Drawn Under the Revolving Facility, Total | $ 65.0 |
Note O - Subsequent Events (Details Textual) $ in Millions |
3 Months Ended | |||||
|---|---|---|---|---|---|---|
|
Jul. 18, 2022
USD ($)
|
Dec. 31, 2022 |
Oct. 01, 2022 |
Oct. 26, 2022
USD ($)
|
Jan. 21, 2022
USD ($)
|
Dec. 25, 2021
USD ($)
|
|
| Debt to EBITDA Ratio | 3 | 3.25 | ||||
| Forecast [Member] | ||||||
| Debt to EBITDA Ratio | 3.25 | |||||
| Restated Credit Agreement [Member] | Revolving Credit Facility [Member] | ||||||
| Line of Credit Facility, Maximum Borrowing Capacity | $ 75 | $ 65 | $ 50 | |||
| Debt to EBITDA Ratio | 3 | |||||
| Restated Credit Agreement [Member] | Revolving Credit Facility [Member] | Subsequent Event [Member] | ||||||
| Line of Credit Facility, Maximum Borrowing Capacity | $ 90 | |||||