Q3 2022 Escalade Inc Earnings Call
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Operator: Good morning, and welcome to the Escalade Inc. Q3 2022 Results Conference Call. At this time, all participants are in a listen-only mode. Our question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Patrick Griffin, Vice President, Corporate Development. Please go ahead.
Operator: Good morning, and welcome to the Escalade Inc. Q3 2022 results conference call. At this time, all participants are in a listen-only mode. Our question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Patrick Griffin, Vice President, Corporate Development. Please go ahead.
Good morning, and welcome to the Escalade, Inc.
Third quarter 2022 results conference call.
At this time, what participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Patrick Griffin.
As president corporate development.
Patrick Griffin: Good morning, and welcome to the Escalade, Incorporated Q3 2022 Earnings Conference Call. Leading the call with me today are President and CEO, Walt Glazer, and Stephen Wawrin, Chief Financial Officer. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. At the conclusion of our prepared remarks, we will open the line for questions. With that, I'd like to turn the call over to Walt.
Patrick Griffin: Good morning, and welcome to the Escalade, Incorporated Q3 2022 Earnings Conference Call. Leading the call with me today are President and CEO, Walt Glazer, and Stephen Wawrin, Chief Financial Officer. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. At the conclusion of our prepared remarks, we will open the line for questions. With that, I'd like to turn the call over to Walt.
Please go ahead, good morning, and welcome to the Escalade incorporated third quarter 2022 earnings Conference call.
Leading the call with me today are president and CEO , Walt Glaser, and Stephen Ward Chief Financial Officer.
Today's discussion contains forward looking statements about future business and financial expectations.
Actual results may differ significantly from those projected in today's forward looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC.
Except as required by law, we undertake no obligation to update our forward looking statements.
At the conclusion of our prepared remarks, we will open the line for questions.
With that I'd like to turn the call over to Walt.
Walt Glazer: Thank you, Patrick, and welcome to those joining us today. During a period of broad-based inflationary pressures and rising interest rates, our Q3 results were impacted by lower customer demand across most product categories as our mass merchant channel partners seek to align elevated inventory levels with a near-term deceleration in consumer discretionary spending. In speaking with our retail partners, we believe the consumer is in a transitional period when households are seeking to recalibrate how much they have to spend on discretionary categories like ours as the cost to maintain their standard of living continues to rise. Importantly, demand hasn't ground to a halt, but it has slowed. Mass merchants have slowed purchasing in our categories to reduce their total inventory. Importantly, outside of the mass merchant channel, all other sales channels generated year-over-year sales growth in the Q3.
Walt Glazer: Thank you, Patrick, and welcome to those joining us today. During a period of broad-based inflationary pressures and rising interest rates, our Q3 results were impacted by lower customer demand across most product categories as our mass merchant channel partners seek to align elevated inventory levels with a near-term deceleration in consumer discretionary spending. In speaking with our retail partners, we believe the consumer is in a transitional period when households are seeking to recalibrate how much they have to spend on discretionary categories like ours as the cost to maintain their standard of living continues to rise. Importantly, demand hasn't ground to a halt, but it has slowed. Mass merchants have slowed purchasing in our categories to reduce their total inventory. Importantly, outside of the mass merchant channel, all other sales channels generated year-over-year sales growth in the Q3.
Thank you Patrick and welcome to those joining us today during a period of broad based inflationary pressures and rising interest rates, our third quarter results were impacted by lower customer demand across most product categories as our mass merchant channel partners seek to align elevated inventory levels with the near term.
Deceleration in consumer discretionary spending.
In speaking with our retail partners. We believe the consumer is in a transitional period when warehouses. They are seeking to recalibrate how much they have to spend on discretionary categories. Like ours is the cost to maintain their standard of living continues to rise.
Importantly, demand hasnt ground to a halt but it has slowed.
Merchants have slowed purchasing in our categories to reduce their total inventory.
Accordingly outside of the mass merchant channel all other sales channels generated year over year sales growth in the third quarter.
Walt Glazer: Over the last two years, we've had to do very little in the way of promotional pricing as demand for our products has grown. This year, as we enter the holiday season, we do expect to introduce selective promotions as we seek to reduce our finished goods inventory toward historical levels over the next several quarters. We believe this inventory reduction will also reduce our carrying cost and improve asset utilization to more acceptable levels in the future. In summary, while the near-term decline in sales growth is disappointing, we believe that the strength and diversity of our brands, diverse sourcing capabilities, and lean operating model position us to successfully navigate the current macroeconomic environment. We also believe that our end consumer, which often includes a higher earning, more affluent demographic, is more resilient through economic cycles, which should benefit us.
Walt Glazer: Over the last two years, we've had to do very little in the way of promotional pricing as demand for our products has grown. This year, as we enter the holiday season, we do expect to introduce selective promotions as we seek to reduce our finished goods inventory toward historical levels over the next several quarters. We believe this inventory reduction will also reduce our carrying cost and improve asset utilization to more acceptable levels in the future. In summary, while the near-term decline in sales growth is disappointing, we believe that the strength and diversity of our brands, diverse sourcing capabilities, and lean operating model position us to successfully navigate the current macroeconomic environment. We also believe that our end consumer, which often includes a higher earning, more affluent demographic, is more resilient through economic cycles, which should benefit us.
Over the last two years, we've had to do very little in the way of promotional pricing as demand for our products has grown.
This year as we enter the holiday season, we do expect to introduce selective promotions as we seek to reduce our finished goods inventory toward historical levels over the next several quarters. We believe this inventory reduction will also reduce our carrying cost and improve asset utilization to more acceptable levels in the future.
In summary, while the near term decline in sales growth is disappointing, we believe that the strength and diversity of our brands diverse sourcing capabilities.
Lean operating model position us to successfully navigate the current macroeconomic environment.
I believe that our end consumer which often includes our higher earning more affluent demographic is more resilient through economic cycles, which should benefit us.
Walt Glazer: Given the slowing demand environment, we stayed very disciplined in managing controllable expenses and addressing supply chain and logistics challenges while continuing to deliver superior value to our customers. Looking forward, we also believe a potential economic downturn may create additional market share opportunities for the company. Turning now to a discussion of our Q3 performance. Net sales declined 7.9% year over year, and gross margin dropped by 432 basis points. The decline in both sales and margin was primarily driven by softness in demand for our outdoor categories, led by archery. This softness was partially offset by sales of our billiards and pickleball products. Elevated freight and logistic expenses more than offset some lower material costs in the third quarter, contributing to the gross profit margin decline.
Walt Glazer: Given the slowing demand environment, we stayed very disciplined in managing controllable expenses and addressing supply chain and logistics challenges while continuing to deliver superior value to our customers. Looking forward, we also believe a potential economic downturn may create additional market share opportunities for the company. Turning now to a discussion of our Q3 performance. Net sales declined 7.9% year over year, and gross margin dropped by 432 basis points. The decline in both sales and margin was primarily driven by softness in demand for our outdoor categories, led by archery. This softness was partially offset by sales of our billiards and pickleball products. Elevated freight and logistic expenses more than offset some lower material costs in the third quarter, contributing to the gross profit margin decline.
Given the slowing demand environment, we've stayed very disciplined in managing controllable expenses and addressing supply chain and logistics challenges, while continuing to deliver superior value to our customers.
Looking forward, we also believe a potential economic downturn may create additional market share opportunities for the company.
Turning now to a discussion of our third quarter performance.
Net sales declined seven 9% year over year, and gross margin dropped by 432 basis points.
The decline in both sales and margin was primarily driven by softness in demand for our outdoor categories led by archery.
This softness was partially offset by sales of our $1 billion pickle ball products.
Elevated freight and logistic expenses more than offset some lower material costs in the third quarter contributing to the gross profit margin decline.
Walt Glazer: We are beginning to see lower ocean freight rates and improved turnaround times, but inland freight remains challenging due to labor and equipment shortages. Our gross profit margin during the quarter was also adversely impacted by a $1 million accrual related to projected expenses for a product recall. We continue to see sustained demand in some of our categories. Pickleball, in particular, is a category where demand remains strong as broad-based adoption of the sport continues at an accelerated pace. As discussed last quarter, we continue to expand our product assortment of paddles, balls, and accessories with our leading brands, ONIX and DURA. Our selection of pickleball gear is perfect for any level of player, from beginner to professional. ONIX, as a leading equipment brand in the sport, remains one of the most visible sponsors of the Professional Pickleball Association and top professionals in the sport.
Walt Glazer: We are beginning to see lower ocean freight rates and improved turnaround times, but inland freight remains challenging due to labor and equipment shortages. Our gross profit margin during the quarter was also adversely impacted by a $1 million accrual related to projected expenses for a product recall. We continue to see sustained demand in some of our categories. Pickleball, in particular, is a category where demand remains strong as broad-based adoption of the sport continues at an accelerated pace. As discussed last quarter, we continue to expand our product assortment of paddles, balls, and accessories with our leading brands, ONIX and DURA. Our selection of pickleball gear is perfect for any level of player, from beginner to professional. ONIX, as a leading equipment brand in the sport, remains one of the most visible sponsors of the Professional Pickleball Association and top professionals in the sport.
We are beginning to see lower ocean freight rates and improved turnaround times.
England trade remains challenging due to labor and equipment shortages.
Our gross profit margin during the quarter was also adversely impacted by a 1 million dollar accrual related to projected expenses for a product recall.
We continue to see sustained demand that some of our categories.
Pickle ball in particular is a category where demand remains strong as broad based adoption of the sport continues at an accelerated pace.
As discussed last quarter, we continue to expand our product assortment of paddle balls and accessories with our leading brands Onyx enduro.
Our selection of Pickle ball gear is perfect for any level of player from the beginner to professional.
Onyx is a leading equipment brand and the sport remains one of the most visible sponsors in the professional pick a ball Association.
Top professionals in the sport.
Walt Glazer: Outside of pickleball, we continue to build our strength in other growing outdoor lifestyle categories. Last month, we announced an exciting new partnership with the American Cornhole League, which provides us the license to make, sell, and distribute American Cornhole League products to our expansive list of retail partners. The ACL is the leading worldwide governing body for professional, competitive, and recreational cornhole. The ACL is also the recognized leader in popularizing cornhole with its pro and amateur events around the country, as well as broadcast deals on ESPN and CBS. With pickleball, cornhole, and other categories, we continue to build strong niche lifestyle brands that in any economic environment tend to have a loyal following of repeat customers that will continue to benefit us over a longer term.
Walt Glazer: Outside of pickleball, we continue to build our strength in other growing outdoor lifestyle categories. Last month, we announced an exciting new partnership with the American Cornhole League, which provides us the license to make, sell, and distribute American Cornhole League products to our expansive list of retail partners. The ACL is the leading worldwide governing body for professional, competitive, and recreational cornhole. The ACL is also the recognized leader in popularizing cornhole with its pro and amateur events around the country, as well as broadcast deals on ESPN and CBS. With pickleball, cornhole, and other categories, we continue to build strong niche lifestyle brands that in any economic environment tend to have a loyal following of repeat customers that will continue to benefit us over a longer term.
Outside of Pickle ball, we continue to build our strength and other growing outdoor lifestyle categories.
Last month, we announced an exciting new partnership with the American corn whole leg, which provides us the license to make sell and distribute American corn whole leg products to our expansive list of retail partners.
The ACL as the leading worldwide governing body for professional competitive and recreational corn.
The ACL as also the recognized leader in popularizing Cornell with its pro and amateur events around the country as well as broadcast deals on ESPN and CBS .
With Pickle ball, Cornwall, and other categories, we continue to build strong niche lifestyle brands and in any economic environment tend to have a loyal following of repeat customers. They.
It will continue to benefit us over a longer term.
Walt Glazer: While we are not satisfied with the 2022 year-to-date results, we are taking steps to rightsize our cost structure and asset base to weather the economic headwinds and position our company for continued growth in the years ahead. Following the end of our Q3, we exercised an additional $15 million accordion feature under our senior revolving credit facility. We now have nearly $30 million of available liquidity. At the end of Q3, net debt outstanding or total debt less cash was 3x trailing 12 months EBITDA. Total inventories were $135 million at the end of Q3, up from $130 million at the end of Q2.
Walt Glazer: While we are not satisfied with the 2022 year-to-date results, we are taking steps to rightsize our cost structure and asset base to weather the economic headwinds and position our company for continued growth in the years ahead. Following the end of our Q3, we exercised an additional $15 million accordion feature under our senior revolving credit facility. We now have nearly $30 million of available liquidity. At the end of Q3, net debt outstanding or total debt less cash was 3x trailing 12 months EBITDA. Total inventories were $135 million at the end of Q3, up from $130 million at the end of Q2.
While we are not satisfied with the 2022 year to date results. We are taking steps to rightsize, our cost structure and asset base to weather the economic headwinds and position our company for continued growth in the years ahead.
Following the end of our third quarter, we exercised an additional $15 million accordion feature under our senior revolving credit facility.
We now have nearly $30 million of available liquidity.
At the end of the third quarter net debt outstanding or total debt less cash was three times trailing 12 months EBITDA.
Total inventories were $135 million at the end of the third quarter up from $130 million at the end of the second quarter.
Walt Glazer: The sequential increase in inventory was primarily the result of softening consumer demand and some order cancellation by our customers due to elevated inventory levels in the retail channel. Vendor deposits and inventory in transit were both down meaningfully in the quarter. As we move through the seasonally strong Q4, we expect to see inventory levels begin to decline, which should benefit our cash and liquidity position going into the new year. As before, we remain committed to our capital allocation strategy and disciplined balance sheet management. We continue to target long-term net leverage of 1.5 to 2 times EBITDA, along with funding internal growth initiatives and the consistent payment of our quarterly cash dividend. With that, I'll turn the call over to Stephen for a review of our financial results. Thanks, Walt, and good morning, everyone.
Walt Glazer: The sequential increase in inventory was primarily the result of softening consumer demand and some order cancellation by our customers due to elevated inventory levels in the retail channel. Vendor deposits and inventory in transit were both down meaningfully in the quarter. As we move through the seasonally strong Q4, we expect to see inventory levels begin to decline, which should benefit our cash and liquidity position going into the new year. As before, we remain committed to our capital allocation strategy and disciplined balance sheet management. We continue to target long-term net leverage of 1.5 to 2 times EBITDA, along with funding internal growth initiatives and the consistent payment of our quarterly cash dividend. With that, I'll turn the call over to Stephen for a review of our financial results. Thanks, Walt, and good morning, everyone.
The sequential increase in inventory was primarily the result of softening consumer demand and some order cancellation by our customers due to elevated inventory levels in the retail channel.
Vendor deposits and inventory in transit were both down meaningfully in the quarter.
As we move through the seasonally strong fourth quarter, we expect to see inventory levels begin to decline, which should benefit our cash and liquidity position going into the new year.
As before we remain committed to our capital allocation strategy and disciplined balance sheet management.
We continue to target long term net leverage and one of one and a half to two times EBITDA.
Along with funding internal growth initiatives and a consistent payment of our quarterly cash dividend.
With that I'll turn the call over to Steven for a review of our financial results.
Thanks, Paul and good morning, everyone for the three months ended October one 2020 to escalate reported net income of $3 million or 22 per diluted share on net sales of $74 $9 million.
Stephen Wawrin: For the 3 months ended 1 October 2022, Escalade reported net income of $3 million or $0.22 per diluted share on net sales of $74.9 million. The company reported gross margin of 18.2% compared to 22.5% in the prior year period. The 432 basis point decline in margin was a result of lower sales, unfavorable product mix, global supply chain constraints, and the non-recurring product recall expense Walt Glazer mentioned earlier. This product recall expense adversely impacted our earnings per share by $0.06 per diluted share in the quarter. Selling, general, and administrative expense as a percentage of net sales declined to 11.7% compared to 12.5% in the prior year period due to ongoing expense mitigation initiatives.
Stephen Wawrin: For the 3 months ended 1 October 2022, Escalade reported net income of $3 million or $0.22 per diluted share on net sales of $74.9 million. The company reported gross margin of 18.2% compared to 22.5% in the prior year period. The 432 basis point decline in margin was a result of lower sales, unfavorable product mix, global supply chain constraints, and the non-recurring product recall expense Walt Glazer mentioned earlier. This product recall expense adversely impacted our earnings per share by $0.06 per diluted share in the quarter. Selling, general, and administrative expense as a percentage of net sales declined to 11.7% compared to 12.5% in the prior year period due to ongoing expense mitigation initiatives.
Company reported gross margin of 18, 2% compared to 22, 5% in the prior year period.
432 basis point decline in margin was the result of lower sales.
Unfavorable product mix global supply chain constraints, and a nonrecurring product recall expenses Walt mentioned earlier.
This product recall expense adversely impacted our earnings per share by six cents per diluted share in the quarter.
Selling general and administrative expense as a percentage of net sales declined 11, 7% compared to 12, 5% in the prior year period due to ongoing expense mitigation initiatives.
Stephen Wawrin: Total cash used in operations was $5.5 million for the quarter compared to use of $2.6 million in the prior year period. Total capital expenditures were approximately $0.3 million during Q3, compared to $4 million in Q3 of last year when we purchased manufacturing and warehouse facilities in Olney, Illinois. We expect to normalize the level of capital expenditures in the quarters ahead. Earnings before interest, taxes, depreciation, and amortization declined 35.3% to $5.8 million in Q3 2022 versus $9 million in the prior year period. For the year to date period, EBITDA decreased 9.7% to $26.7 million compared to $29.5 million in 2021.
Stephen Wawrin: Total cash used in operations was $5.5 million for the quarter compared to use of $2.6 million in the prior year period. Total capital expenditures were approximately $0.3 million during Q3, compared to $4 million in Q3 of last year when we purchased manufacturing and warehouse facilities in Olney, Illinois. We expect to normalize the level of capital expenditures in the quarters ahead. Earnings before interest, taxes, depreciation, and amortization declined 35.3% to $5.8 million in Q3 2022 versus $9 million in the prior year period. For the year to date period, EBITDA decreased 9.7% to $26.7 million compared to $29.5 million in 2021.
Total cash used in operations was $5 $5 million for the quarter compared to use of $2 $6 million.
Prior year period total capital expenditures were approximately $43 million during the third quarter compared to $4 million in the third quarter of last year, when we purchased manufacturing and warehouse facilities and only Illinois.
We expect to normalize the level of capital expenditures in the quarters ahead.
Earnings before interest taxes, depreciation and amortization declined 35, 3% to $5 8 million in the third quarter of 2022 versus $9 million in the prior year period for the year to date period, EBITDA decreased nine 7% to $26 7 million compared to $29 5 million.
In 2021.
Stephen Wawrin: As of 1 October 2022, the company had total cash and equivalence of $4 million, together with $10 million of availability on our senior secured revolving credit facility maturing in 2027. As Walt mentioned, this availability increased by $15 million in late October following the close of our Q3 as we exercise the remaining portion of our accordion on senior secured credit facilities. In conjunction with the execution of the accordion feature, we also amended our credit agreement to give us more cushion on our leverage ratio requirement. The amendment increased our maximum leverage ratio from 3 times to 3.25 times for the Q3 and Q4 of 2022, 3 times for the Q1 of 2023, and back to 2.75 times starting the Q2 of 2023.
Stephen Wawrin: As of 1 October 2022, the company had total cash and equivalence of $4 million, together with $10 million of availability on our senior secured revolving credit facility maturing in 2027. As Walt mentioned, this availability increased by $15 million in late October following the close of our Q3 as we exercise the remaining portion of our accordion on senior secured credit facilities. In conjunction with the execution of the accordion feature, we also amended our credit agreement to give us more cushion on our leverage ratio requirement. The amendment increased our maximum leverage ratio from 3 times to 3.25 times for the Q3 and Q4 of 2022, 3 times for the Q1 of 2023, and back to 2.75 times starting the Q2 of 2023.
As of October one 2022, the company had total cash and equivalents of $4 million together with $10 million of availability on our senior secured revolving credit facility maturing in 2027 as.
As Walt mentioned this availability increased by $15 million in late October following the close of our third quarter as we exercise the remaining portion of our accordion on senior secured credit facility.
In conjunction with the execution of the accordion feature we also amended our credit agreement to give us more cushion on our leverage ratio requirement.
The amendment increased our maximum leverage ratio from three times to three five times for the third and fourth quarters of 2022, three times for the first quarter of 2023 and back to 275 times starting in the second quarter of 2023.
Stephen Wawrin: In addition, we also announced this morning a quarterly dividend of $0.15 per share to be paid to all shareholders of record on 5 December 2022, and dispersed on 12 December 2022. With that, we will turn the call over to the operator to begin our question and answer portion of the call.
Stephen Wawrin: In addition, we also announced this morning a quarterly dividend of $0.15 per share to be paid to all shareholders of record on 5 December 2022, and dispersed on 12 December 2022. With that, we will turn the call over to the operator to begin our question and answer portion of the call.
In addition, we also announced this morning, a quarterly dividend of <unk> 15 per share to be paid to all shareholders of record on December five 2022 and dispersed on December 12 2022.
With that we will turn the call over to the operator to begin our question and answer portion of the call.
Operator: Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. We have a first question from the line of Rommel Dionisio with Aegis Capital. Please go ahead.
Operator: Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. We have a first question from the line of Rommel Dionisio with Aegis Capital. Please go ahead.
Thank you.
At this time, we will be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
We have our first question from the line of Rama do you want <unk> with Aegis capital. Please go ahead.
Rommel Dionisio: Yeah, good morning. I wonder if you could just talk about the competitive promotional environment and pricing environment. Just because, I mean, when you have excess retail inventories, you usually see a lot of promotions to clear that inventory. Obviously in an inflationary period, that's sort of a countervailing factor. I wonder if you could just kinda maybe discuss that. I know you talked about in the prepared comments some select promotions of your own, especially as we're entering, you know, the holiday season and Black Friday and all that. If, you know, you could just give us some color on the competitive promotional environment. Thanks.
Rommel Dionisio: Yeah, good morning. I wonder if you could just talk about the competitive promotional environment and pricing environment. Just because, I mean, when you have excess retail inventories, you usually see a lot of promotions to clear that inventory. Obviously in an inflationary period, that's sort of a countervailing factor. I wonder if you could just kinda maybe discuss that. I know you talked about in the prepared comments some select promotions of your own, especially as we're entering, you know, the holiday season and Black Friday and all that. If, you know, you could just give us some color on the competitive promotional environment. Thanks.
Hi, yes, good morning.
Wonder if you could just talk about the.
The competitive promotional environment pricing environment.
Just because I mean, when you have excess retail inventory is usually see a lot of promotions to clear that inventory, but I've seen an inflationary period, that's sort of a ton of revealing soccer I wonder if you could just kind of maybe discuss that I know you've talked about in the prepared comments. Some select promotions of Bureau in this weird huh, especially as we're entering the holiday season, and Black Friday, and all that if you could just give us some color on that.
Competitive promotional environment. Thanks.
Walt Glazer: Sure. Rommel, thanks for your question. Yeah, certainly there is inflation in the system. The reality is that we, a lot of our competitors, and our customers have excess inventory. We're anticipating more promotional activity in Q4. Our customers have indicated they intend to do the same, and you know, we're prepared for that. You know, our primary objective is to reduce the level of inventory that we're carrying currently, and we have plans in place to do that.
Walt Glazer: Sure. Rommel, thanks for your question. Yeah, certainly there is inflation in the system. The reality is that we, a lot of our competitors, and our customers have excess inventory. We're anticipating more promotional activity in Q4. Our customers have indicated they intend to do the same, and you know, we're prepared for that. You know, our primary objective is to reduce the level of inventory that we're carrying currently, and we have plans in place to do that.
Sure Rommel Thanks for your question.
Yes, certainly there is inflation in the system, but.
The reality is that we a lot of our competitors and our customers have excess inventory and so we are anticipating.
Promotional activity in the fourth quarter, our customers have indicated they intend to do the same.
And we were prepared for that and you know our primary objective is to reduce the.
Level of inventory that we're carrying currently and we have plans in place to do that.
Rommel Dionisio: Okay. I know one of the initiatives on cost control you guys have implemented over the last few quarters has been kind of re-engineering some products as well. Could you just give us an update on that, if that's continuing and how that's going? Thanks.
Rommel Dionisio: Okay. I know one of the initiatives on cost control you guys have implemented over the last few quarters has been kind of re-engineering some products as well. Could you just give us an update on that, if that's continuing and how that's going? Thanks.
Okay, and I know one of the initiatives on cost control you guys have implemented over the last few quarters, it's been kind of reengineering some products as well could you just give us an update on that if that's continuing and how that's how that's going thanks.
Walt Glazer: Sure. Yeah. You know, cost reduction is always on our mind. It's something that we do, you know, we focus on every day, both in our overhead, you know, in our product design. We, you know, are continuing to do that. I would say, Rommel, that we are seeing some decreases in raw material costs. We're seeing decreases in ocean freight rates. You know, we believe that, you know, costs will continue to come down. Here again, that's another reason why we want to reduce, you know, the amount of inventory that we're carrying. We anticipate purchasing inventory in the year ahead at cost below what they were last year.
Walt Glazer: Sure. Yeah. You know, cost reduction is always on our mind. It's something that we do, you know, we focus on every day, both in our overhead, you know, in our product design. We, you know, are continuing to do that. I would say, Rommel, that we are seeing some decreases in raw material costs. We're seeing decreases in ocean freight rates. You know, we believe that, you know, costs will continue to come down. Here again, that's another reason why we want to reduce, you know, the amount of inventory that we're carrying. We anticipate purchasing inventory in the year ahead at cost below what they were last year.
Sure.
So cost reduction is always on our mind, it's something that we do we focus on every day.
And our overhead and our product design.
So we are continuing to do that I would say ROM. Although we are seeing some decreases in raw material costs, we're seeing decreases in.
Ocean freight rates so.
We believe that you know.
Costs will continue to come down here again, that's another reason why we want to reduce the amount of inventory that we're carrying.
We anticipate.
Purchasing inventory in the year ahead at cost below what they were last year.
Rommel Dionisio: Okay. Thanks very much for the color.
Rommel Dionisio: Okay. Thanks very much for the color.
Okay. Thanks, very much for the color.
Yeah.
Operator: Thank you. Again, to ask a question, ladies and gentlemen, please press star followed by one on your touch-tone phone now. Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I'd like to turn the call back over to Patrick Griffin for closing remarks. Over to you, Patrick.
Operator: Thank you. Again, to ask a question, ladies and gentlemen, please press star followed by one on your touch-tone phone now. Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I'd like to turn the call back over to Patrick Griffin for closing remarks. Over to you, Patrick.
Thank you.
Again to ask a question, ladies and gentlemen, Please press star followed by one.
I will now touch on for now.
Okay.
Okay.
Thank you ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back over to Patrick Griffin for closing remarks.
Patrick.
Patrick Griffin: Once again, thank you for your interest in Escalade and joining our call. Should you have any questions, feel free to contact us at ir@escaladeinc.com, and a member of our team will follow up with you. This concludes our call today. You may now disconnect.
Patrick Griffin: Once again, thank you for your interest in Escalade and joining our call. Should you have any questions, feel free to contact us at ir@escaladeinc.com, and a member of our team will follow up with you. This concludes our call today. You may now disconnect.
Once again, thank you for your interest and escalate and joining our call.
Should you have any questions feel free to contact us at IR at escalate, Inc. Dot com and.
And a member of our team will follow up with you.
This concludes our call today you may now disconnect.
Operator: Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Thank you ladies and gentlemen. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
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Okay.
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