SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 24, 2007
Commission File Number 0-6966
ESCALADE, INCORPORATED
(Exact name of registrant as specified in its charter)
Indiana 13-2739290
(State of incorporation) (I.R.S. EIN)
817 Maxwell Ave, Evansville, Indiana 47711
(Address of principal executive office) (Zip Code)
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812-467-1334
(Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act
Common Stock, No Par Value The NASDAQ Stock Market LLC
(Title of Class) (Name of Exchange on Which Registered)
Securities registered pursuant to section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ]
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12 b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at April 12, 2007
-------------------- -----------------------------
Common, no par value 12,974,486
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INDEX
Page
No.
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets as of March 24, 2007,
March 25, 2006, and December 30, 2006 3
Consolidated Condensed Statements of Income for the Three Months
Ended March 24, 2007 and March 25, 2006 4
Consolidated Condensed Statements of Comprehensive Income
for the Three Months Ended March 24, 2007 and March 25, 2006 4
Consolidated Condensed Statements of Cash Flows for the Three
Months Ended March 24, 2007 and March 25, 2006 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 11
Item 4 - Controls and Procedures 11
Part II. Other Information
Item 2 - Issuer Purchases of Equity Securities 12
Item 6 - Exhibits 13
Signatures 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(All amounts in thousands except share information)
March 24, March 25, December 30,
2007 2006 2006
------------- ------------- -------------
(Unaudited) (Unaudited) (Audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 37 $ 2,094 $ 3,829
Receivables, less allowance of
$1,440; $2,229; and
$1,559; respectively 31,416 26,394 33,590
Inventories 35,595 36,584 32,232
Prepaid expenses 3,352 1,524 2,085
Deferred income tax benefit 968 1,283 733
Income Tax Receivable 1,556 1,132 2,001
------------- ------------- -------------
TOTAL CURRENT ASSETS 72,924 69,011 74,470
Property, plant and equipment, net 20,673 21,080 20,657
Intangible assets 22,551 6,541 20,608
Goodwill 24,992 21,759 25,027
Investments 10,298 7,767 9,011
Interest rate swap 197 247 239
Other assets 147 1,606 703
------------- ------------- -------------
$ 151,782 $ 128,011 $ 150,715
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 9,586 $ 5 $ 10,336
Current portion of long-term debt -- 906 --
Trade accounts payable 4,142 5,109 3,350
Accrued liabilities 21,609 18,270 27,659
------------- ------------- -------------
TOTAL CURRENT LIABILITIES 35,337 24,290 41,345
Other Liabilities:
Long-term debt 31,878 26,016 22,609
Deferred compensation 1,005 1,378 1,046
------------- ------------- -------------
TOTAL LIABILITIES 68,220 51,684 65,000
Stockholders' equity:
Preferred stock:
Authorized 1,000,000 shares; no par
value, none issued
Common stock:
Authorized 30,000,000 shares; no par
value, issued and outstanding -
13,008,198; 13,028,940; and 13,039,457;
shares respectively 13,008 13,029 13,039
Retained Earnings 66,956 62,106 69,194
Accumulated other comprehensive income 3,598 1,192 3,482
------------- ------------- -------------
83,562 76,327 85,715
------------- ------------- -------------
$ 151,782 $ 128,011 $ 150,715
============= ============= =============
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See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(All amounts in thousands, except per share amounts)(Unaudited)
Three Months Ended
-------------------------------
March 24, 2007 March 25, 2006
-------------- --------------
Net Sales $ 33,467 $ 32,800
Costs, expenses and other income:
Cost of products sold 22,455 22,048
Selling, general and administrative expenses 8,708 8,405
-------------- --------------
Operating income 2,304 2,347
Interest expense, net (517) (254)
Other income (expense) (421) (65)
-------------- --------------
Income before income taxes 1,366 2,028
Provision for income taxes 269 304
-------------- --------------
Net income $ 1,097 $ 1,724
============== ==============
Per Share Data:
Basic earnings per share $ 0.08 $ 0.13
Diluted earnings per share $ 0.08 $ 0.13
Cash dividend paid $ 0.22 $ 0.20
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Net income $ 1,097 $ 1,724
Unrealized gain on marketable equity securities
available for sale, net of tax of
$(45) and $(97), respectively 68 146
Foreign currency translation adjustment 72 53
Unrealized gain (loss) on interest rate swap
agreement net of tax of $18 and $(29),
respectively (27) 43
-------------- --------------
Comprehensive income $ 1,210 $ 1,966
============== ==============
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See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(All amounts in thousands) (Unaudited)
Three Months Ended
-------------------------------
March 24, 2007 March 25, 2006
-------------- --------------
Operating Activities:
Net income $ 1,097 $ 1,724
Depreciation and amortization 1,061 933
Gain on disposal of property and equipment (52) --
Employee stock-based compensation 95 130
Adjustments necessary to reconcile net income to
net cash provided (used) by operating activities (6,418) (485)
-------------- --------------
Net cash provided (used) by operating activities (4,217) 2,302
-------------- --------------
Investing Activities:
Purchase of property and equipment (353) (1,263)
Acquisition of assets (3,627) (7,436)
Proceeds from sale of property and equipment 141 --
Proceeds from reduction in life insurance 306 --
Investment in marketable securities available for
sale (1,090) --
-------------- --------------
Net cash used by investing activities (4,623) (8,699)
-------------- --------------
Financing Activities:
Net increase in notes payable 8,519 7,928
Proceeds from exercise of stock options 129 440
Purchase of common stock (453) (227)
Dividends paid (2,872) (2,606)
-------------- --------------
Net cash provided by financing activities 5,323 5,535
-------------- --------------
Effect of exchange rate changes on cash (275) (61)
-------------- --------------
Net (decrease) increase in cash and cash equivalents (3,792) (923)
Cash and cash equivalents, beginning of period 3,829 3,017
-------------- --------------
Cash and cash equivalents, end of period $ 37 $ 2,094
============== ==============
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See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The significant accounting policies followed by the Company and its wholly owned subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments that are of a normal recurring nature and are in the opinion of management necessary for a fair statement of the results for the periods reported have been included in the accompanying consolidated condensed financial statements. The condensed consolidated balance sheet of the Company as of December 30, 2006 has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K annual report for 2006 filed with the Securities and Exchange Commission.
The results of operations for the three-month periods ended March 24, 2007 and March 25, 2006 are not necessarily indicative of the results to be expected for the full year.
March 24, March 25, December 30,
(All amounts in thousands) 2007 2006 2006
-------------- -------------- --------------
Raw materials $ 10,054 $ 8,754 $ 7,786
Work in progress 6,910 6,452 6,021
Finished goods 18,631 21,378 18,425
-------------- -------------- --------------
$ 35,595 $ 36,584 $ 32,232
============== ============== ==============
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The provision for income taxes was computed based on financial statement income.
In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"), which became effective for the Company on December 31, 2006. The Interpretation prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The adoption of FIN 48 has resulted in a transition adjustment reducing beginning retained earnings by $264 thousand; $164 thousand in taxes and $100 thousand in interest. If recognized, the tax portion of the adjustment would affect the effective tax rate. Interest costs and penalties related to income taxes are classified as interest expense
and selling, general and administrative costs, respectively in the Company's financial statements. Tax returns for all years after 2002 are subject to future examination by tax authorities.
The shares used in computation of the Company's basic and diluted earnings per
common share are as follows:
3 Months Ended
-------------------------------
All amounts in thousands March 24, 2007 March 25, 2006
------------------------------------------------------------- -------------- --------------
Weighted average common shares outstanding 13,034 12,979
Dilutive effect of stock options 16 59
-------------- --------------
Weighted average common shares outstanding, assuming dilution 13,050 13,038
============== ==============
Number of anti-dilutive stock options 462 621
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On March 16, 2007, the Company paid a dividend of $0.22 per common share to all shareholders of record on March 9, 2007. The total amount of the dividend was approximately $2.9 million and was charged against retained earnings.
As of and for the Three Months
Ended March 24, 2007
--------------------------------------------------------
Sporting Office
In thousands Goods Products Corp. Total
------------------------------------- ------------ ------------ ------------ -----------
Revenues from external customers $ 20,457 $ 13,010 $ -- $ 33,467
Operating income(loss) 916 2,151 (763) 2,304
Net income (loss) 43 1,286 (232) 1,097
Total assets $ 93,723 $ 45,569 $ 12,490 $ 151,782
As of and for the Three Months
Ended March 25, 2006
--------------------------------------------------------
Sporting Office
In thousands Goods Products Corp. Total
------------------------------------- ------------ ------------ ------------ -----------
Revenues from external customers $ 19,884 $ 12,916 $ -- $ 32,800
Operating income(loss) 525 2,414 (592) 2,347
Net income (loss) 50 1,584 90 1,724
Total assets $ 74,150 $ 42,305 $ 11,556 $ 128,011
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In February 2007, the Company purchased substantially all of the assets of Trophy Ridge, LLC, which manufactures and sells premium archery accessories under the Trophy Ridge brand name. The Trophy Ridge brand name has significant appeal in the sports enthusiast market place and will be used to further expand distribution of the Company's archery accessory products. The Trophy Ridge operation will be relocated and consolidated into the Company's existing archery operations in the Gainesville, Florida plant. The operating results of Trophy Ridge will be included in the Sporting Goods segment results from the date of acquisition. The purchase price of $3.8 million was paid in Cash. Contingent on the achievement of certain performance criteria, the Company may be obligated to pay an additional $1.0 million over a two year period from the date of acquisition. The estimated fair market value of the assets acquired as of the date of acquisition is as follows:
(Amounts in thousands) Amount
Current assets $ 1,083
Property, plant & equipment 170
Other assets 125
Patents & Trademarks 2,376
------------
Net assets acquired $ 3,754
============
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Item 1A. Not Required.
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, the impact of competitive products and pricing, product demand and market acceptance, new product development, the continuation and development of key customer and supplier relationships, Escalade's ability to control costs, general economic conditions, fluctuation in operating results, changes in the securities market 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" or "Company") manufactures and distributes products for two industries: Sporting Goods and Office Products. Within these industries the Company has successfully built a market presence in niche markets. This strategy is heavily dependent on expanding the customer base, barriers to entry, brand recognition and excellent customer service. A key strategic advantage is the Company's established relationships with major customers that allow the Company to bring new products to the market in a cost effective manner while maintaining a diversified product line and wide customer base. In addition to strategic customer relations, the Company has over 75 years of manufacturing and import experience that enable it to be a low cost supplier.
Results of Operations
Consolidated net sales for the first quarter of 2007 were up 2% compared to the same quarter last year. Consolidated gross margins and operating income remained relatively unchanged from the same period last year. However, increased interest and amortization costs resulted in a decline in net income of $627 thousand.
The following schedule sets forth certain consolidated statement of income data
as a percentage of net revenue:
Three months ended
March 24, 2007 March 25, 2006
--------------------------------------------- -------------- --------------
Net revenue 100.0% 100.0%
Cost of products sold 67.1% 67.2%
-------------- --------------
Gross margin 32.9% 32.8%
Selling, administrative and general expenses 26.0% 25.6%
-------------- --------------
Operating income 6.9% 7.2%
============== ==============
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Consolidated Revenue and Gross Margin
Net revenues in the Sporting Goods business were up 3% in the first quarter compared to last year, primarily due to increased sales in the specialty and dealer channel which increased 74% in the current quarter compared to the same period last year. The bulk of this increase, approximately 62%, came from internal growth in the archery and playground product lines; the remainder came from products acquired during the second quarter of last year. 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 changes in the Company's mass-market retail customers. Sales to mass-market retail customers were down 25% in the first quarter compared to the same period last year primarily due to a general overall market decline in consumer demand for game room products such as table tennis, billiards and other table games which are primarily sold through mass-market retailers. The Company continues to enjoy strong relationships with its mass-market retail customers, but believes that the general trend of diminishing consumer demand for game room products will result in lower sales to mass-market retail customers in 2007 than was achieved in 2006. Growth in the specialty and dealer channel is expected to compensate for the anticipated decline in the mass-market retail channel so that total Sporting Goods sales in 2007 will be relatively unchanged from the 2006 results.
Net revenues in the Office Products business increased 1% in the first quarter of 2007 compared to the same period last year. A slight decline in North America sales was offset by increased sales in Europe which benefited from a change in exchange rates and is now beginning to realize benefits from the additional resources allocated to sales efforts in the latter half of 2006. Management believes total sales in the Office Products business will be relatively unchanged from the level achieved in 2006.
The consolidated gross margin ratio for the first quarter of 2007 was relatively unchanged from the same quarter last year. However, the gross margin ratio in the Sporting Goods business realized a slight increase over the same period last year due to increased sales in the specialty and dealer channel which has higher overall gross margin ratios than the mass-market retail channel. The gross margin ratio in the Office Products business declined slightly during the
quarter as a result of the decline in North America sales which have a higher gross margin ratio than Europe sales. Management anticipates continued improvement in the Sporting Goods gross margin ratio to be offset by continued declines in the Office Products gross margin ratio resulting in little or no change in the overall gross margin ratio for 2007 compared to last year.
Consolidated Selling, General and Administrative Expenses
As a percentage of sales, consolidated selling, general and administrative ("SG&A") costs increased slightly during the first quarter compared to the same period last year because of one-time costs associated with the integration of the Trophy Ridge acquisition into the Sporting Goods business and higher professional fees incurred by Corporate.
Interest Expense and Other Expense
Interest costs in the first quarter of 2007 were higher in comparison to the same quarter in 2006 because of increased debt levels and higher effective interest rates.
The increase in other expense is due primarily to amortization costs associated with acquisitions completed during the second quarter of 2006.
Financial Condition and Liquidity
The Company continues to exhibit strong financial health. Total bank debt increased in the first quarter of 2007 to accommodate the Trophy Ridge acquisition and the payment of a dividend to shareholders. The following schedule summarizes the Company's total bank debt:
March 24, March 25, December 30,
In thousands 2007 2006 2006
------------------------------ -------------- -------------- --------------
Notes payable short-term $ 9,586 $ 5 $ 10,336
Current portion long-term debt -- 906 --
Long term debt 31,878 26,016 22,609
-------------- -------------- --------------
Total bank debt $ 41,464 $ 26,927 $ 32,945
============== ============== ==============
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As a percentage of stockholders' equity, total bank debt was 50%, 35% and 38% at March 24, 2007, March 25, 2006 and December 30, 2006, respectively. Management believes that it can generate a higher rate of return on shareholder's equity at current debt levels.
During the first quarter of 2007, operations used $4.2 million in cash primarily due to reductions in accounts payable and accrued liabilities. In addition to funding operations, the Company used $3.8 million in cash to acquire the assets of Trophy Ridge, $2.9 million to pay a dividend to shareholders, and invested $1.1 million in marketable equity securities available for sale. Funding came primarily from borrowings on the Company's revolving debt facilities.
The Company funds working capital requirements through operating cash flows and revolving credit agreements with its bank. The Company's relationship with its primary lending bank remains strong and the Company expects to have access to the same level of revolving credit that was available in 2006. In addition, the Company believes it can quickly reach agreement to increase available credit should the need arise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to financial market risks, including changes in currency exchange rates, interest rates and marketable equity security prices. To mitigate these risks, the Company utilizes derivative financial instruments, among other strategies. At the present time, the only derivative financial instrument used by the company is an interest rate swap. The Company does not use derivative financial instruments for speculative purposes.
A substantial majority of revenue, expense and capital purchasing activities are transacted in U.S. dollars. However, the Company's foreign subsidiaries enter into transactions in other currencies, primarily the Euro. To protect against reductions in value and the volatility of future cash flows caused by changes in currency exchange rates, the Company carefully considers the use of transaction and balance sheet hedging programs. Such programs reduce, but do not entirely eliminate, the impact of currency exchange rate changes. Presently the Company does not employ currency exchange hedging financial instruments, but has adjusted transaction and cash flows to mitigate adverse currency fluctuations. Historical trends in currency exchanges indicate that it is reasonably possible that adverse changes in exchange rates of 20% for the Euro could be experienced in the near term. Such adverse changes could have resulted in a material impact on income before taxes for the three months ended March 24, 2007.
A substantial portion of the Company's debt is based on U.S. prime and LIBOR interest rates. In an effort to lock-in current low rates and mitigate the risk of unfavorable interest rate fluctuations the Company has entered into an interest rate swap agreement. This agreement effectively converted a portion of its variable rate debt into fixed rate debt.
An adverse movement of equity market prices would have an impact on the Company's long-term marketable equity securities that are included in other assets on the consolidated balance sheet. At March 24, 2007 the aggregate carrying value of long-term marketable equity securities was $4.0 million. Due to the unpredictable nature of the equity market the Company has not employed any hedge programs relative to these investments.
ITEM 4. CONTROLS AND PROCEDURES
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 Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the Company has investments in certain unconsolidated entities. As the Company does not control or manage these entities, its disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those it maintains with respect to its consolidated subsidiaries.
The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief
Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.
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 first quarter of 2007.
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 2007 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. Not Required.
Item 2. (c) ISSUER PURCHASES OF EQUITY SECURITIES
-----------------------------------------------------------------------------------------------------------------------
(d) Maximum
(c) Total Number Number (or
of Shares (or Approximate
(a) Total Units) Purchased Dollar Value) of
Number as Part Shares (or Units)
of Shares (b) Average Price of Publicly that May Yet Be
(or Units) Paid per Share Announced Plans Purchased Under the
Period Purchased (or Unit) or Programs Plans or Programs
------------------------------------- ------------------ -------------------- -------------------- --------------------
Shares purchases prior to
12/30/2006 under the current
repurchase program. 482,438 $9.46 482,438 $ 2,654,811
------------------------------------- ------------------ -------------------- -------------------- --------------------
First quarter purchases:
------------------------------------- ------------------ -------------------- -------------------- --------------------
12/31/2006 - 01/27/2007 None None No Change No Change
------------------------------------- ------------------ -------------------- -------------------- --------------------
01/28/2007 - 02/24/2007 7,984 $9.33 490,422 2,580,353
------------------------------------- ------------------ -------------------- -------------------- --------------------
03/01/2007 - 03/24/2007 39,970 $9.46 530,392 2,202,058
------------------------------------- ------------------ -------------------- -------------------- --------------------
Total share purchases under the
current program 530,392 $9.46 530,392 $ 2,202,058
------------------------------------- ------------------ -------------------- -------------------- --------------------
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The Company has one stock repurchase program which was established in February 2003 by the Board of Directors and which authorized management to expend up to $3,000,000 to repurchase shares on the open market as well as in private negotiated transactions. The repurchase plan has no termination date. There have been no share repurchases that were not part of a publicly announced program. In February 2006, the Board of Directors increased the remaining amount on this plan to its original level of $3,000,000.
Item 3, 4 and 5 Not Required.
Item 6. Exhibits
(a) Exhibits
Number Description
------ ---------------------------------------------------
3.1 Restatement of Articles of Incorporation for
Escalade, Incorporated.
31.1 Chief Executive Officer Rule 13a-14(a)/15d-14(a)
Certification.
31.2 Chief Financial Officer Rule 13a-14(a)/15d-14(a)
Certification.
32.1 Chief Executive Officer Section 1350 Certification.
32.2 Chief Financial Officer Section 1350 Certification.
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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: April 12, 2007 /s/ TERRY D. FRANDSEN
-----------------------------------------
Interim CEO, Vice President and
Chief Financial Officer
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EXHIBIT 3.1
RESTATEMENT OF ARTICLES OF INCORPORATION
OF
ESCALADE, INCORPORATED
FIRST: The name of the Corporation is ESCALADE, INCORPORATED
SECOND: (A) The address of the registered office of the Corporation in the State of Indiana is 817 Maxwell Avenue, Evansville, Indiana 47717.
(B) The name of the registered agent of the Corporation at such address is Robert E. Griffin.
THIRD: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Indiana Business Corporation Law.
FOURTH: (A) The total number of shares of stock which the Corporation shall have authority to issue shall be Thirty-One Million (31,000,000) shares, consisting of Thirty Million (30,000,000) shares of common stock, no par value per share and One Million (1,000,000) shares of preferred stock, no par value per share.
(B) Each share of the common stock of the Corporation shall have one (1) vote. Each share of the preferred stock of the Corporation shall have no voting rights, except as otherwise required by law.
(C) (1) The Board of Directors of the Corporation is hereby expressly granted the authority to fix any and all designations and powers, preferences and rights, and qualifications, limitations or restrictions thereof, which are permitted by the Indiana Business Corporation Law in respect to any class or classes of stock or any series of any class of stock of the Corporation as the same may be fixed, from time to time, by resolution or resolutions of the Board of Directors of the Corporation and shall not be fixed by these Articles of Incorporation.
(2) The Board of Directors of the Corporation is hereby expressly vested with the authority to state, from time to time, by such resolution or resolutions as are referred to in the Indiana Business Corporation Law, any and all of the matters with respect to the stock of the Corporation set forth therein.
FIFTH: The Board of Directors of the Corporation is hereby expressly vested with the authority to transfer, from time to time, any part or all of the property and assets, obligations or liabilities of the Corporation to any one or more of the Corporation's wholly owned subsidiary corporations without the approval and adoption of such transfer or transfers by the stockholders of the Corporation, provided, however, that such action is not otherwise expressly prohibited under the Indiana Business Corporation Law.
SIXTH: The Corporation has received consideration of at least One Thousand Dollars ($1,000.00) for the issuance of shares of the Corporation's capital stock.
SEVENTH: The By-Laws of the Corporation 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 of the Corporation or without such a meeting by the written consent of all of the members of the Board of Directors of the Corporation, 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.
EIGHTH: These Restatement of Articles of Incorporation supersede and take the place of the Corporation's hereto before existing Articles of Incorporation.
IN WITNESS WHEREOF, the undersigned, being the President and Secretary herein named, action on behalf of the Corporation, do hereby make and subscribe these Restatement of Articles of Incorporation on this 19 day of March, 2007.
ESCALADE, INCORPORATED
By: /s/ DANIEL A. MESSMER
-------------------------------------
Daniel A. Messmer, President
By: /s/ TERRY D. FRANDSEN
-------------------------------------
Terry D. Frandsen, Secretary
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EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Terry Frandsen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Escalade, Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-15(f)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: April 12, 2007 /s/ TERRY FRANDSEN
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Chief Executive Officer
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EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Terry D. Frandsen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Escalade, Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-15(f)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: April 12, 2007 /s/ TERRY D. FRANDSEN
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Chief Financial Officer
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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 ending March 24, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Terry Frandsen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ TERRY FRANDEN --------------------------- Chief Executive Officer April 12, 2007 |
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 ending March 24, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Terry D. Frandsen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ TERRY D. FRANDSEN --------------------------- Chief Financial Officer April 12, 2007 |