Escalade, Inc. announced that revenues for the third quarter of 2011 were relatively flat with the same period in 2010. Concern over economic volatility has resulted in retailers cautiously managing inventory levels, which has slowed sales growth in certain of the Sporting Goods product lines. Year to date, consolidated revenue was up 9.1% over the same period last year.
The Company recorded an operating loss in the third quarter of 2011 driven largely by accelerated depreciation expense related to the anticipated replacement of its Oracle ERP system. Net operating loss for the quarter was $0.9 million and net operating income for the first nine months of 2011 was $3.9 million compared to operating income of $2.4 million and $7.2 million for the three and nine month periods last year, respectively. Without the accelerated depreciation expense of $2.2 million, the Company would have recorded operating income of $1.4 million and $6.1 million for the three and nine month periods of 2011.
Revenues from the Sporting Goods business were down 2.6% for the third quarter and up 9.3% for the first nine months of 2011, compared with the same periods last year. The Company expects sales in the fourth quarter to exceed fourth quarter last year.
Compared to last year, revenues from the Information Security and Print Finishing business were up 9.1% and 8.6% for the third quarter and first nine months of 2011, respectively. Excluding the effects of changes in currency exchange rates, revenues in this segment were up 5.4% and 5.4% for the third quarter and first nine months of 2011, respectively. The Company is experiencing a softening in the government and commercial channels for Information Security and Print Finishing products and expects growth in the fourth quarter to be less than that experienced in the first nine months of the year.
The overall gross margin ratios for the third quarter and first nine months of 2011 were 28.9% and 32.0%, respectively, compared to 32.2% and 33.1%, respectively, for same periods last year. Additional sales promotions in the Sporting Goods segment resulted in a lower gross margin percentage in the third quarter this year as compared with the third quarter last year. The Information Security and Printing Finishing segment incurred warranty cost related to replacement of an electronic component on a single product sold to a limited commercial customer base. Warranty cost related to this product for the quarter and first nine months of 2011 was $400 thousand and $455 thousand, respectively. Of this expense, $300 thousand is recorded as an accrued liability.
Compared to the same periods last year, consolidated selling, general and administrative (“SG&A”) costs increased 34.9% in the third quarter and 21.8% in the first three quarters of 2011. The Company continues to reinvest in product development and marketing efforts. In addition, the Company recorded $2.2 million of accelerated depreciation in the third quarter of 2011 and will record a similar expense in the fourth quarter of 2011.
Other income for the quarter and first nine months of 2011 was $0.8 million and $1.1 million higher than same periods last year, respectively. The increase is largely the result of growth in one of the Company's joint ventures.
“Sales thus far in 2011 are up 9% over last year, driven by expanded product distribution and strong acceptance of new products,” stated Robert J. Keller, President and Chief Executive Officer of Escalade, Inc. “However, we experienced flat sales in the third quarter, as retailers lowered inventory levels in response to current economic uncertainty. We anticipate steady sales growth in the upcoming quarters, based on strong customer acceptance of recently launched products.”
Escalade is a leading manufacturer and marketer of sporting goods and information security and print finishing products sold worldwide.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited, In Thousands Except Per Share Amounts)
Three Months Nine Months Twelve Months
Ended Ended Ended
------------------ ----------------- -----------------
01 02 01 02 01 02
October October October October October October
2011 2010 2011 2010 2011 2010
-------- -------- -------- -------- -------- --------
NET SALES $ 28,734 $ 28,565 $ 97,582 $ 89,471 $128,767 $118,514
OPERATING EXPENSES
Cost of goods sold 20,428 19,369 66,344 59,813 90,005 81,830
Selling and
administrative 8,725 6,469 26,064 21,398 32,370 27,541
Amortization 436 368 1,245 1,042 1,492 1,283
-------- -------- -------- -------- -------- --------
OPERATING INCOME
(LOSS) (855) 2,359 3,929 7,218 4,900 7,860
OTHER INCOME
(EXPENSE)
Interest expense (117) (223) (529) (1,005) (687) (1,140)
Other income 1,065 275 1,700 586 3,164 1,659
-------- -------- -------- -------- -------- --------
INCOME BEFORE
INCOME TAXES 93 2,411 5,100 6,799 7,377 8,379
PROVISION FOR
INCOME TAXES 473 1,239 2,792 2,963 2,847 3,431
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS) $ (380) $ 1,172 $ 2,308 $ 3,836 $ 4,530 $ 4,948
======== ======== ======== ======== ======== ========
PER SHARE DATA
Basic earnings
(loss) per share $ (0.03) $ 0.09 $ 0.18 $ 0.30 $ 0.35 $ 0.39
======== ======== ======== ======== ======== ========
Diluted earnings
(loss) per share $ (0.03) $ 0.09 $ 0.17 $ 0.29 $ 0.34 $ 0.37
======== ======== ======== ======== ======== ========
Cash dividends
paid $ 0.25 -- $ 0.25 -- $ 0.35 --
======== ======== ======== ======== ======== ========
Average shares
outstanding 12,871 12,740 12,838 12,712 12,824 12,698
