Escalade, Incorporated posted revenues in the first quarter of 2007 that were relatively unchanged in total from the same period last year. However, profitability was lower as a result of higher costs and lower income from European joint ventures. As a result, earnings per share were 8 cents for the quarter compared to 13 cents for the same period last year.
Revenues in the Sporting Goods segment increased 3% in the first quarter compared to the same quarter last year as a result of increased sales in the specialty retail and dealer marketplace. Expanding distribution into the specialty retail and dealer marketplace is a key element in the company's strategy designed to expand the customer base, increase product offerings and lessen the impact of sales to the company's mass-market retail customers. During the first quarter, sales to the specialty retail and dealer channel grew 74% compared to the same period last year. Approximately 38% of this increase came from products related to acquisitions completed in 2006 while the remainder of the increase represents strong internal growth of existing products. Sales to mass-market retail customers declined 25% during the first quarter compared to last year due primarily to diminishing consumer demand for game room products. We expect this trend in sales to continue throughout the rest of 2007, but expect gains in sales to the specialty retail and dealer channel to offset declines in the mass-market retailer channel. Operating income from the Sporting Goods segment was up in the first quarter of 2007 compared to last year reflecting the absence of start-up costs associated with the Reynosa, Mexico plant that were recorded in the first quarter of last year. Although sales for 2007 are expected to be flat compared to last year, we expect improved operating profits from the Sporting Goods business in 2007.
The company also announced that Terry Frandsen, currently serving as the company's CFO, will serve as interim CEO following the unexpected and sudden death of Daniel A. Messmer who served as the company's CEO and president before his death on April 9, 2007. Mr. Frandsen will continue to serve as the company's CFO while serving as the interim CEO.
Robert E. Griffin, Escalade's Chairman stated that “Finding someone to replace Daniel Messmer will be difficult. Over the 34 years that he worked for Escalade, he helped build a very successful culture based on collaboration, trust, and respect for all the individuals in the organization. Mr. Messmer's leadership style fostered high performance expectations that are crucial to the Company's success. As we search for his permanent replacement, we will be looking for these same traits. Key characteristics of Escalade's next CEO will include a proven ability to lead an organization of Escalade's size and complexity; significant knowledge of the industries in which Escalade does business; the ability to develop strong executive managers in our subsidiaries; and the ability to lead and inspire a collaborative effort of Escalade's entire management team in developing and implementing effective strategic plans for both of our business segments. The sudden death of Mr. Messmer was a shock to everyone in the Company, but our existing management team has the leadership and experience necessary to see the Company through this transition period, and we do not anticipate any significant disruption in the Company's business operations. Our customers can expect the same continued high level of service and quality demonstrated before Mr. Messmer's untimely death.”
The Escalade Board of Directors also withdrew its previous determination to increase the size of the Board to seven directors effective as of the date of the Annual Meeting of Stockholders to be held on April 27, 2007, and voted instead to retain the size of the Board at six directors as permitted pursuant to the terms of Escalade's Bylaws. Other than Mr. Messmer, the nominees named in Escalade's proxy statement relating to the 2007 Annual Meeting will be nominated for those six board seats.
