What changed in this filing

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Item 1. Financial Statements

2025-05-05 compared with 2024-10-24 · 183 added, 152 removed, 205 unchanged (62% of the section changed)

3 unchanged sentences

All Amounts in Thousands Except Share Information

September 30,

Current Assets:

13 unchanged sentences

Accrued liabilities

Income tax payable

Current operating lease liabilities

22 unchanged sentences

Three Months Ended

Nine Months Ended

All Amounts in Thousands Except Per Share Data

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Costs and Expenses

1 unchanged sentence

Selling, administrative and general expenses

Gain on sale of assets held for sale

Operating Income

9 unchanged sentences

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

All Amounts in Thousands

Balances at June 30, 2023

Expense of restricted stock units

Dividends declared

Balances at September 30, 2023

Balances at December 31, 2023

2 unchanged sentences

Dividends declared

Issuance of common stock for service

Balances at September 30, 2023

All Amounts in Thousands

Balances at June 30, 2024

Expense of restricted stock units

Dividends declared

Balances at September 30, 2024

Balances at March 31, 2024

Balances at December 31, 2024

2 unchanged sentences

Dividends declared

Balances at September 30, 2024

Purchase of stock

Issuance of common stock for service

Balances at March 31, 2025

See notes to Consolidated Condensed Financial Statements.

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended

Three Months Ended

All Amounts in Thousands

September 30,

March 31, 2025

March 31, 2024

Operating Activities:

2 unchanged sentences

Stock-based compensation

(Gain) loss on disposal of assets

Loss on disposal of assets

Common stock issued in lieu of bonus to officers

Director stock compensation

Changes in assets and liabilities

3 unchanged sentences

Proceeds from sale of property and equipment

Net cash provided by (used in) investing activities

Net cash used in investing activities

Financing Activities:

1 unchanged sentence

Payments on long-term debt

Deferred financing fees

Cash dividends paid

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Purchase of stock

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental Cash Flows Information

Interest paid

Income taxes paid, net

See notes to Consolidated Condensed Financial Statements.

7 unchanged sentences

These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report for 2024 filed with the Securities and Exchange Commission.

Correction of Immaterial Errors

During the year ended December 31, 2023, management became aware of an error in reporting of common stock value within the consolidated balance sheet and statement of stockholders’ equity.

Common stock previously was reported with a $ 1.00 stated value even though, per the Company’s Articles of Incorporation, the common stock has no par value.

Additionally, components of equity that should have been reflected within common stock were improperly reported within retained earnings.

We have reviewed historical activity reflected in common stock and retained earnings and have identified adjustments to be made to correct the immaterial reporting error.

The consolidated balance sheet and consolidated statement of stockholders’ equity have been corrected and have been updated for prior years within this Form 10-Q.

We assessed the materiality of this error on prior periods' financial statements in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No.

99, Materiality , codified in Accounting Standards Codification (ASC) 250, Presentation of Financial Statements .

We concluded that the error was not material to any prior annual or interim period and therefore, amendments of previously filed reports are not required.

In accordance with ASC 250, we have corrected the reporting for all prior periods presented by revising the consolidated financial statements appearing herein.

Periods not presented herein will be revised, as applicable, in future filings.

The revisions had no impact on total assets, total liabilities, total shareholders' equity, net income or the cash flow statement.

The impact of this revision on our consolidated balance sheet and consolidated statement of stockholders’ equity as of September 30, 2023 was as follows:

As Previously

Retained Earnings

Total Stockholders’ Equity

Assets Held For Sale

We classify assets as held for sale when our management approves and commits to a formal plan of sale that is probable of being completed within one (1) year.

Assets designated as held for sale are recorded at the lower of their current carrying value or their fair market value, less costs to sell, beginning in the period in which the assets meet the criteria to be classified as held for sale.

During the three months ended September 30, 2024, the Company completed the sale of its Mexico facility for $ 6.6 million.

The Company received cash proceeds of $ 5.9 million, with the remaining $ 0.7 million deposited in an escrow account.

The Company recognized a gain of $ 3.9 million, included in operating income in the Consolidated Statement of Operations.

Note B ‑ Seasonal Aspects

The results of operations for the three and nine months ended September 30, 2024 and September 30, 2023 are not necessarily indicative of the results to be expected for the full year.

The results of operations for the three months ended March 31, 2025 and March 31, 2024 are not necessarily indicative of the results to be expected for the full year.

Note C ‑ Inventories

September 30,

Raw materials

6 unchanged sentences

Unobservable inputs for which little or no market data exists, therefore requiring the Company to develop its own assumptions.

Due to their short-term nature, the fair value of cash and cash equivalents, accounts receivable, accounts payable and certain other liabilities approximated their carrying values at September 30, 2024, December 31, 2023 and September 30, 2023.

Due to their short-term nature, the fair value of cash and cash equivalents, accounts receivable, accounts payable and certain other liabilities approximated their carrying values at March 31, 2025, December 31, 2024 and March 31, 2024.

The Company believes the carrying value of borrowings under our senior secured revolving credit facility, due to variable rate interest, adequately reflects the fair value of these instruments.

The Company discloses the fair value of its term loan using Level 2 inputs, which are estimated using treasury rates for a similar instrument, as follows:

September 30, 2024

March 31, 2025

December 31, 2024

September 30, 2023

March 31, 2024

Term Loan Facility

1 unchanged sentence

The fair value of stock-based compensation is recognized in accordance with the provisions of FASB ASC 718, Stock Compensation .

During the nine months ended September 30, 2024, the Company awarded 12,900 restricted stock units to directors and 130,800 restricted stock units to employees.

The restricted stock units awarded to directors time vest over two years ( one -half one year from grant date and one -half two years from grant date) provided that the director is still a director of the Company at the vest date.

Director restricted stock units are subject to forfeiture, except for termination of services as a result of retirement, death or disability, if on the vesting date the director no longer holds a position with the Company.

For the three months ended March 31, 2025 and March 31, 2024, the Company recognized stock based compensation expense of $ 467 thousand and $ 429 thousand, respectively.

At March 31, 2025 and March 31, 2024, there was $ 2.0 million and $ 1.0 million, respectively, in unrecognized stock-based compensation expense related to non-vested stock awards.

The unrecognized compensation expense of unvested restricted stock awards not yet recognized as of March 31, 2025 is expected to be recognized over the weighted average period of 1.7 years.

On March 11, 2025, the Company awarded 72,351 restricted stock units to employees.

The 2025 restricted stock units awarded to employees time vest over three years (one-third one year from grant, one-third two years from grant and one-third three years from grant) provided that the employee continues to serve as an employee, director or consultant of the Company on the vesting date.

For the three and nine months ended September 30, 2024, the Company recognized stock based compensation expense of $ 503 thousand and $ 1,429 thousand, respectively, compared to stock based compensation expense of $ 546 thousand and $ 1,463 thousand for the same periods in the prior year.

At September 30, 2024 and September 30, 2023, respectively, there was $ 1,838 thousand and $ 1,979 thousand in unrecognized stock-based compensation expense related to non-vested stock awards.

The unrecognized compensation expense of unvested restricted stock awards not yet recognized as of September 30, 2024 is expected to be recognized over the weighted average period of 1.4 years.

Note F ‑ Segment Information

For the Three Months

Ended September 30, 2024

Sporting Goods

Revenues from external customers

Operating income (loss)

Net income (loss)

As of and for the Nine Months

Ended September 30, 2024

The Company operates as one operating segment.

The Company’s chief operating decision maker (“CODM”) is its president and chief executive officer, who reviews financial information presented on a consolidated basis.

The CODM uses consolidated net sales and consolidated net income to assess financial performance and allocate resources.

As of and for the Three Months

Ended March 31, 2025

Sporting Goods

Revenues from external customers

Cost of product sold

Other operating expenses

Operating income (loss)

Interest expense

Provision (benefit) for Income Taxes

Net income (loss)

For the Three Months

Ended September 30, 2023

Sporting Goods

Revenues from external customers

Operating income (loss)

As of and for the Nine Months

Ended September 30, 2023

Depreciation and Amortization

As of and for the Three Months

Ended March 31, 2024

Sporting Goods

Revenues from external customers

Cost of product sold

Other operating expenses

Operating income (loss)

Interest expense

Provision (benefit) for Income Taxes

Net income (loss)

Depreciation and Amortization

Note G – Dividend Payment

3 unchanged sentences

The total amount of the dividend was approximately $ 2.1 million and was charged against retained earnings.

On July 15, 2024, the Company paid a quarterly dividend of $ 0.15 per common share to all shareholders of record on July 8, 2024.

The total amount of the dividend was approximately $ 2.1 million and was charged against retained earnings.

On October 14, 2024 the Company paid a quarterly dividend of $ 0.15 per common share to all shareholders of record on October 7, 2024.

The total amount of the dividend was approximately $ 2.1 million and was charged against retained earnings.

Note H ‑ Earnings Per Share

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

Weighted average common shares outstanding

Dilutive effect of restricted stock units

Dilutive effect of stock options and restricted stock units

Weighted average common shares outstanding, assuming dilution

Note I – New Accounting Standards and Changes in Accounting Principles

With the exception of that discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended September 30, 2024, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, that are of significance, or potential significance to the Company.

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which enhances reporting requirements under Topic 280.

ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within the segment measure of profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM.

ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024.

With the exception of that discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2025, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, that are of significance, or potential significance to the Company.

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which expands the disclosures required in an entity’s income tax rate reconciliation table and requires disclosure of income taxes paid in both U.S.

and foreign jurisdictions.

The amendments are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, to be applied on a prospective basis, with retrospective application permitted.

The Company is currently evaluating the impact the adoption of ASU 2023-09 will have on its annual consolidated financial statements.

Note J – Revenue from Contracts with Customers

18 unchanged sentences

Changes in the estimated amounts recognized in prior years are recorded as an adjustment to the accrued liability and sales in the current year.

The accrued liability amount attributable to warranties was $ 604 thousand as of September 30, 2024.

The accrued liability amount attributable to warranties was $ 608 thousand as of March 31, 2025.

There were no changes to the accrual due to a change in estimate during the current period.

2 unchanged sentences

The Company reviews such allowances on an ongoing basis and accruals are adjusted, if necessary, as additional information becomes available.

Contract Balances – Amounts relating to returns and customer allowances create contract liabilities, which were $ 5,985 thousand, $ 5,325 thousand and $ 5,866 thousand as of September 30, 2024, December 31, 2023, and December 31, 2022.

Contract Balances – Amounts relating to returns and customer allowances create contract liabilities, which were $ 5,629 thousand, $ 6,708 thousand and $ 5,325 thousand as of March 31, 2025, December 31, 2024, and December 31, 2023.

Disaggregation of Revenue – We generate revenue from the sale of widely recognized sporting goods brands in basketball goals, archery, indoor and outdoor game recreation and fitness products.

3 unchanged sentences

Three Months Ended

Nine Months Ended

All Amounts in Thousands

September 30,

March 31, 2025

March 31, 2024

Gross Sales by Channel:

10 unchanged sentences

Our leases have remaining lease terms of 1 year to 4 years.

As of September 30, 2024, the Company has not entered into any lease arrangements classified as a finance lease.

As of March 31, 2025, the Company has not entered into any lease arrangements classified as a finance lease.

We determine if an arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities and operating lease liabilities on our consolidated balance sheets.

Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities and operating lease liabilities on our consolidated balance sheet.

The Company has elected an accounting policy to not recognize short-term leases (one year or less) on the balance sheet.

4 unchanged sentences

When the implicit rate of the lease is not provided or cannot be determined, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments.

Lease terms may include options to extend or terminate the lease and recognized in the presentation of the ROU assets and operating lease liabilities when it is reasonably certain that we will exercise those options.

Lease terms may include options to extend or terminate the lease and are recognized in the presentation of the ROU assets and operating lease liabilities when it is reasonably certain that we will exercise those options.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

1 unchanged sentence

Three Months Ended

Nine Months Ended

All Amounts in Thousands

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Lease Expense

4 unchanged sentences

Operating Lease – Operating Cash Flows

New ROU Assets – Operating Leases

Other information about lease amounts recognized in our consolidated financial statements is summarized as follows:

Nine Months Ended

All Amounts in Thousands

September 30,

Weighted Average Remaining Lease Term – Operating Leases (in years)

Weighted Average Remaining Lease Term – Operating Leases (years)

Weighted Average Discount Rate – Operating Leases

Future minimum lease payments under non-cancellable leases as of September 30, 2024 were as follows:

Future minimum lease payments under non-cancellable leases as of March 31, 2025 were as follows:

All Amounts in Thousands

Remainder of Year 1

Total future minimum lease payments

Less imputed interest

Reported as of September 30, 2024

Reported as of March 31, 2025

Current operating lease liabilities

1 unchanged sentence

Note L – Commitments and Contingencies

The Company is involved in litigation arising in the normal course of business.

The Company does not believe that the disposition or ultimate resolution of existing claims or lawsuits will have a material adverse effect on the business or financial condition of the Company.

The Company is involved in litigation arising in the normal course of its business, but the Company does not believe the disposition or ultimate resolution of such claims or lawsuits will have a material adverse effect on the business or financial condition of the Company.

Based on current information, available insurance coverage and established reserves, the Company believes that the eventual outcome of existing litigation against the Company will not, individually or in the aggregate, have a material adverse effect on the Company’s consolidated financial position.

However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to the Company’s results of operations for any particular period, depending, in part, upon the size of the loss or liability imposed and the operating results for the applicable period.

Note M – Debt

On January 21, 2022, the Company entered into an Amended and Restated Credit Agreement (“Restated Credit Agreement”) with its issuing bank, JP Morgan Chase Bank, N.A.

(“Chase”), and the other lenders identified in the Restated Credit Agreement (collectively, the “Lender”).

Under the terms of the Restated Credit Agreement, Old National Bank has been added as a Lender.

The Lenders have now made available to the Company a senior revolving credit facility with increased maximum availability of $ 65.0 million (the “Revolving Facility”), up from $ 50.0 million, plus an accordion feature that would allow borrowings up to $ 90.0 million under the Revolving Facility subject to certain terms and conditions.

The maturity date of the revolving credit facility was extended to January 21, 2027.

The Company may prepay the Revolving Facility, in whole or in part, and reborrow prior to the revolving loan maturity date.

The Restated Credit Agreement further extended the maturity date for the term loan facility to January 21, 2027.

On July 18, 2022, the Company entered into the First Amendment to the Restated Credit Agreement.

Under the terms of the First Amendment, the Lender increased the maximum availability under the senior revolving credit facility from $ 65.0 million to $ 75.0 million pursuant to the accordion feature in the Restated Credit Agreement.

The First Amendment also adjusted the funded debt to EBITDA ratio financial covenant to 3:00 to 1:00 as of the end of the Company’s third and fourth fiscal quarters of 2022.

On October 26, 2022, the Company entered into the Second Amendment ("Second Amendment”) to the Restated Credit Agreement.

Under the terms of the Second Amendment, the Lender increased the maximum availability under the senior revolving credit facility from $ 75.0 million to $ 90.0 million pursuant to the accordion feature in the Restated Credit Agreement.

The Second Amendment adjusted the funded debt to EBITDA ratio financial covenant to 3:25 to 1:00 as of the end of the Company’s third and fourth fiscal quarters of 2022 and 3:00 to 1:00 as of the end of the Company’s first fiscal quarter of 2023.

The Second Amendment also modified the EBITDA definition to permit add-backs of a) up to $ 2.0 million for disposition related expenses;

and b) up to $ 2.0 million for unusual or non-recurring expenses which are incurred prior to the end of fiscal year 2023 and which are subject to the approval of the Administrative Agent.

On May 8, 2023, the Company entered into the Third Amendment (the “Third Amendment”) to the Restated Credit Agreement.

The Third Amendment adjusted the funded debt to EBITDA ratio financial covenant to 4:25 to 1:00 as of the end of the Company’s second fiscal quarter of 2023, 3:00 to 1:00 as of the end of the Company’s third fiscal quarter of 2023, and 2:75 to 1:00 as of the end of the Company’s fourth fiscal quarter of 2023 and thereafter.

The Third Amendment adjusted the fixed charge coverage ratio covenant to 1:10 to 1:00 commencing as of the Company’s fourth fiscal quarter of 2023 and 1:25 to 1:00 as of the end of the Company’s first fiscal quarter of 2024 and thereafter.

For the Company’s second and third fiscal quarters in 2023, the Third Amendment suspended the fixed charge coverage ratio covenant and added a minimum EBITDA covenant of $ 22.5 million as of the end of each such fiscal quarter.

Under the terms of the Third Amendment, the Company and the Lender also agreed to decrease the maximum availability under the senior revolving credit facility from $ 90.0 million to $ 75.0 million, upon the consummation of the sale of the Company’s Mexican subsidiary and the dissolution of Escalade Insurance, Inc.

The proceeds from such sale and dissolution, respectively, will be used to partially prepay the amounts outstanding under the revolving credit facility.

As reflected in the Fourth Amendment to the Restated Credit Agreement effective September 1, 2023, the maximum availability of the senior revolving credit facility was reduced to $ 85.0 million following the dissolution of Escalade Insurance, Inc.

On October 11, 2024, the Company entered into the Fifth Amendment (the “Fifth Amendment”) to the Restated Credit Agreement.

On October 11, 2024, the Company entered into the Fifth Amendment (the “Fifth Amendment”) to its Amended and Restated Credit Agreement with its issuing bank, JPMorgan Chase Bank, N.A.

and the other lenders identified therein (the “Restated Credit Agreement”).

The Fifth Amendment eliminated the fixed charge coverage ratio covenant and related provisions.

2 unchanged sentences

The Fifth Amendment further revised the restricted payments covenant to provide that if at any time the Company’s Funded Debt to EBITDA Ratio would exceed 1.75 to 1.0, then the aggregate combined total of cash dividends and Company share repurchases may not exceed $ 12.0 million in any trailing twelve month period.

The Company was in compliance with the debt covenants set forth in the Restated Credit Agreement as of September 30, 2024.

As of September 30, 2024, the outstanding principal amount of the term loan was $ 27.4 million and total amount drawn under the Revolving Facility was $ 2.1 million.

The Company was in compliance with the debt covenants set forth in the Restated Credit Agreement as of March 31, 2025.

As of March 31, 2025, the outstanding principal amount of the term loan was $ 23.8 million and total amount drawn under the Revolving Facility was zero .

Note N – Provision for Taxes

The effective tax rate for the three months ending September 30, 2024 was 23.9 % compared to 16.6 % for the same three month period last year.

The effective tax rate for the nine months ending September 30, 2024 was 23.9 % compared to 19.0 % for the same period last year.

The increase in the effective tax rate for 2024 is primarily due to the recognition of gain on the sale of stock in Harvard Sports, Inc., a wholly owned subsidiary of Escalade, Inc., which was completed during the three months ended September 30, 2024.

Another factor causing an increase in rate from the prior year is the dissolution of the Company’s captive insurance company.

In prior years, the premiums paid to the captive were included in book income, but were non-taxable, resulting in a decrease in tax rate.

With the dissolution of the captive in 2023, Escalade no longer has this non-taxable income to reduce its income tax rate.

The effective tax rate for the three months ending March 31, 2025 was 23.8 % compared to 23.8 % for the same three month period last year.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder.

All statements, other than statements of historical fact, are forward-looking statements.

These statements relate to our financial condition, results of operations, plans, objectives, future performance, capital actions or business.

They usually can be identified by the use of forward-looking language such as “will likely result,” “may,” “are expected to,” “is anticipated,” “potential,” “estimate,” “forecast,” “projected,” “intends to,” or may include other similar words or phrases such as “believes,” “plans,” “trend,” “objective,” “continue,” “remain,” or similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” or similar verbs.

You should not place undue reliance on these statements, as they are subject to risks and uncertainties.

These risks include, but are not limited to:

Escalade’s ability to achieve its business objectives;

Escalade’s ability to successfully achieve the anticipated results of strategic transactions, including the integration of the operations of acquired assets and businesses and of divestitures or discontinuances of certain operations, assets, brands, and products;

the continuation and development of key customer, supplier, licensing and other business relationships;

Escalade’s plans and expectations surrounding the transition to its new Chief Executive Officer and all potential related effects and consequences;

Escalade’s ability to develop and implement our own direct to consumer e-commerce distribution channel;

the impact of competitive products and pricing;

product demand and market acceptance;

new product development;

Escalade’s ability to successfully negotiate the shifting retail environment and changes in consumer buying habits;

the financial health of our customers;

disruptions or delays in our business operations, including without limitation disruptions or delays in our supply chain, arising from political unrest, war, labor strikes, natural disasters, public health crises such as the coronavirus pandemic, and other events and circumstances beyond our control;

the evaluation and implementation of remediation efforts designed and implemented to enhance the Company’s control environment;

the potential identification of one or more additional material weaknesses in the Company’s internal control of which the Company is not currently aware or that have not yet been detected;

Escalade’s ability to control costs, including managing inventory levels;

Escalade’s ability to successfully implement actions to lessen the potential impacts of tariffs and other trade restrictions applicable to our products and raw materials, including impacts on the costs of producing our goods, importing products and materials into our markets for sale, and on the pricing of our products;

our international operations, including any related to political uncertainty and geopolitical tensions;

general economic conditions, including inflationary pressures;

fluctuation in operating results;

changes in foreign currency exchange rates;

changes in the securities markets;

continued listing of the Company’s common stock on the NASDAQ Global Market;

the Company’s inclusion or exclusion from certain market indices;

Escalade’s ability to obtain financing, to maintain compliance with the terms of such financing and to manage debt levels;

the availability, integration and effective operation of information systems and other technology, and the potential interruption of such systems or technology;

the potential impact of actual or perceived defects in, or safety of, our products, including any impact of product recalls or legal or regulatory claims, proceedings or investigations involving our products;

risks related to data security of privacy breaches;

the potential impact of regulatory claims, proceedings or investigations involving our products;

and other risks detailed from time to time in Escalade’s filings with the Securities and Exchange Commission.

Escalade’s future financial performance could differ materially from the expectations of management contained herein.

Escalade undertakes no obligation to release revisions to these forward-looking statements after the date of this report.

Escalade, Incorporated (Escalade, the Company, we, us or our) is focused on growing its Sporting Goods business through organic growth of existing categories, strategic acquisitions, and new product development.

The Sporting Goods business competes in a variety of categories including basketball goals, archery, billiards, indoor and outdoor game recreation and fitness products.

Strong brands and on-going investment in product development provide a solid foundation for building customer loyalty and continued growth.

Within the sporting goods industry, the Company has successfully built a robust market presence in several niche markets.

This strategy is heavily dependent on expanding our customer base, barriers to entry, strong brands, excellent customer service and a commitment to innovation.

A key strategic advantage is the Company’s established relationships with major customers that allow the Company to bring new products to market in a cost effective manner while maintaining a diversified portfolio of products to meet the demands of consumers.

In addition to strategic customer relations, the Company has substantial manufacturing and import experience that enable it to be a low cost supplier.

To enhance growth opportunities, the Company has focused on promoting new product innovation and development and brand marketing.

In addition, the Company has embarked on a strategy of acquiring companies or product lines that complement or expand the Company's existing product lines or provide expansion into new or emerging categories in sporting goods.

A key objective is the acquisition of product lines with barriers to entry that the Company can take to market through its established distribution channels or through new market channels.

Significant synergies are achieved through assimilation of acquired product lines into the existing Company structure.

Management believes that key indicators in measuring the success of these strategies are revenue growth, earnings growth, new product introductions, and the expansion of channels of distribution.

The United States Government has recently made a series of announcements concerning tariffs enacted and/or proposed to be enacted on the importation of goods into the United States including a baseline tariff rate and individualized higher rates on many countries including countries that supply goods to the Company, including China from which the Company imports a substantial amount of goods.

Some countries have indicated a willingness to negotiate reciprocal trade agreements and the administration has also paused or modified many of its announced tariffs leading to uncertainty with respect to which tariffs may apply and the size and scope of such tariffs.

Other countries, such as China, have announced retaliatory tariffs and other restrictive measures to which the administration has responded in kind leading to concerns of a sustained trade war.

Tariffs, a potential trade war with China and other restrictions on trade could result in increased costs and/or the unavailability of goods purchased by the Company, which in turn may result in lower profitability and/or a decline in sales as well as the loss of goodwill among customers.

General economic conditions, inflation, recessionary fears, rising interest rates, changes in the housing market and declining consumer confidence also may impact the Company adversely.

Management cannot predict the full impact of these factors on the Company.

Due to the above circumstances and as described generally in this Form 10-Q, the Company’s results of operations for the period ended March 31, 2025 are not necessarily indicative of the results to be expected for fiscal year 2025.

Results of Operations

The following schedule sets forth certain consolidated statement of operations data as a percentage of net revenue:

Three Months Ended

March 31, 2025

March 31, 2024

Cost of products sold

Selling, administrative and general expenses

Operating income

Revenue and Gross Margin

Sales decreased 3.2% for the first quarter of 2025, compared with the same period in the prior year.

Sales decreased primarily due to softer demand for basketball and table tennis products, partially offset by an increase in demand for archery and safety products.

Gross margin increased to 26.7% for the first quarter of 2025 compared to 25.0% for the same period in 2024 primarily driven by lower fixed costs and decreased inventory storage and handling costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) were $10.6 million for the first quarter of 2025 compared to $10.7 million for the same period in the prior year, a decrease of $0.1 million or 1.2%.

SG&A as a percent of sales is 19.1% for the first quarter of 2025 compared with 18.7% for the same period in the prior year.

Provision (Benefit) for Income Taxes

The effective tax rate for the first three months of 2025 and 2024 was 23.8%.

Financial Condition and Liquidity

Total debt at the end of the first three months of 2025 was $23.8 million, a decrease of $1.8 million from December 31, 2024.

The following schedule summarizes the Company’s total debt:

Current portion of long-term debt

Long term debt

As a percentage of stockholders’ equity, total debt was 14.1%, 15.1% and 32.5% at March 31, 2025, December 31, 2024, and March 31, 2024 respectively.

On October 11, 2024, the Company entered into the Fifth Amendment (the “Fifth Amendment”) to its Amended and Restated Credit Agreement with its issuing bank, JPMorgan Chase Bank, N.A.

and the other lenders identified therein (the “Restated Credit Agreement”).

The Fifth Amendment eliminated the fixed charge coverage ratio covenant and related provisions.

The fixed charge ratio covenant was replaced by a new minimum interest coverage ratio covenant of 3.50 to 1:00 effective September 30, 2024.

Under the terms of the Fifth Amendment, the Company and the Lender also agreed to decrease the maximum availability under the senior revolving credit facility from $75.0 million to $60.0 million, but added an accordion feature that could increase the facility in an amount not to exceed $85.0 million.

The Company was in compliance with the debt covenants set forth in the Restated Credit Agreement as of March 31, 2025.

As of March 31, 2025, the outstanding principal amount of the term loan was $23.8 million and total amount drawn under the Revolving Facility was zero.

The Company funds working capital requirements and shareholder dividends through operating cash flows and revolving credit agreements with its Lenders.

The Company expects that cash generated from its 2025 operations and its access to adequate levels of revolving credit will provide it with sufficient cash flows for its operations and to meet growth needs.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Required.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Escalade maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rules 13a-15(e) and 15d-15(e).

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, could provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report.

Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

Remediation of Previously Reported Material Weakness

As previously reported in Part II, Item 9A.

“Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2024, in connection with our assessment of the effectiveness of internal control over financial reporting as of December 31, 2024, we identified control deficiencies with respect to segregation of duties conflicts.

During the year ended December 31, 2024, certain material estimates / calculations continued to be prepared or compiled by the CFO.

Because of this individual being the CFO there is not an individual in a supervisory role reviewing these estimates and calculations.

Accordingly, this represents a continued material weakness in our controls over the period end close process involving segregation of duties conflicts.

This material weakness did not result in a misstatement of the Company’s financial statements;

however, it could have resulted in misstatements of interim or annual consolidated financial statements and disclosures that would result in a material misstatement that would not be prevented or detected.

In response to the material weakness discussed above, we redistributed the work previously performed by the CFO so that the material estimates and calculations were performed by others within the accounting team and then were reviewed and approved by the CFO.

As of March 31, 2025, with the completion of remediation efforts previously discussed, we have successfully remediated the material weakness.

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 2025.

Other than the completed remediation efforts described above, 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 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

LEGAL PROCEEDINGS.

Refer to Note L of the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 for information regarding legal proceedings.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements