ESCALADE INC 10-Q

Item 1. FINANCIAL STATEMENTS ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS All Amounts in Thousands Except Share Information September 30, 2025 December 31, 2024 September 30, 2024 (Unaudited) (Audited) (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 3,509 $ 4,194 $ 426 Receivables, less allowance of $ 957 ; $ 694 ; and $ 669 ; respectively 52,756 48,768 53,480 Inventories 80,662 76,025 85,485 Prepaid expenses 4,350 4,372 5,117 Prepaid income tax - 465 156 TOTAL CURRENT ASSETS 141,277 133,824 144,664 Property, plant and equipment, net 21,716 22,221 22,856 Operating lease right-of-use assets 1,347 1,186 7,640 Intangible assets, net 25,636 25,838 26,409 Goodwill 42,326 42,326 42,326 Other assets 158 935 1,035 TOTAL ASSETS $ 232,460 $ 226,330 $ 244,930 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 7,143 $ 7,143 $ 7,143 Trade accounts payable 21,119 11,858 19,965 Accrued liabilities 12,923 15,050 13,769 Income tax payable 1,169 - - Current operating lease liabilities 496 444 1,083 TOTAL CURRENT LIABILITIES 42,850 34,495 41,960 Other Liabilities: Long‑term debt 13,095 18,452 22,353 Deferred income tax liability 3,302 3,302 3,125 Operating lease liabilities 886 787 7,125 Other liabilities - 297 297 TOTAL LIABILITIES 60,133 57,333 74,860 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 – 13,803,745 ; 13,732,719 ; and 13,877,302 ; shares respectively 3,757 4,218 5,909 Retained earnings 168,570 164,779 164,161 TOTAL STOCKHOLDERS' EQUITY 172,327 168,997 170,070 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 232,460 $ 226,330 $ 244,930 See notes to Consolidated Condensed Financial Statements. 3 ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended All Amounts in Thousands Except Per Share Data September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Net sales $ 67,786 $ 67,738 $ 177,598 $ 187,568 Costs and Expenses Cost of products sold 48,720 50,947 130,305 141,312 Selling, administrative and general expenses 11,198 11,675 32,018 32,439 Amortization 567 1,047 1,701 2,231 Gain on sale of assets held for sale - ( 3,905 ) - ( 3,905 ) Operating Income 7,301 7,974 13,574 15,491 Other Income (Expense) Interest expense ( 204 ) ( 530 ) ( 661 ) ( 1,995 ) Other income 21 7 103 13 Income Before Income Taxes 7,118 7,451 13,016 13,509 Provision for Income Taxes 1,564 1,784 3,018 3,223 Net Income $ 5,554 $ 5,667 $ 9,998 $ 10,286 Earnings Per Share Data: Basic earnings per share $ 0.40 $ 0.41 $ 0.73 $ 0.74 Diluted earnings per share $ 0.40 $ 0.40 $ 0.72 $ 0.73 Dividends declared $ 0.15 $ 0.15 $ 0.45 $ 0.45 See notes to Consolidated Condensed Financial Statements. 4 ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED) Common Stock Retained All Amounts in Thousands Shares Amount Earnings Total Balances at June 30, 2024 13,877 $ 5,406 $ 160,576 $ 165,982 Net income - - 5,667 5,667 Expense of restricted stock units - 503 - 503 Dividends declared - - ( 2,082 ) ( 2,082 ) Balances at September 30, 2024 13,877 $ 5,909 $ 164,161 $ 170,070 Balances at December 31, 2023 13,737 $ 4,480 $ 160,099 $ 164,579 Net income - - 10,286 10,286 Expense of restricted stock units - 1,429 - 1,429 Settlement of restricted stock units 140 - - - Dividends declared - - ( 6,224 ) ( 6,224 ) Balances at September 30, 2024 13,877 $ 5,909 $ 164,161 $ 170,070 Common Stock Retained All Amounts in Thousands Shares Amount Earnings Total Balances at June 30, 2025 13,804 $ 3,251 $ 165,087 $ 168,338 Net income - - 5,554 5,554 Expense of restricted stock units - 506 - 506 Dividends declared - - ( 2,071 ) ( 2,071 ) Balances at September 30, 2025 13,804 $ 3,757 $ 168,570 $ 172,327 Balances at December 31, 2024 13,733 $ 4,218 $ 164,779 $ 168,997 Net income - - 9,998 9,998 Expense of restricted stock units - 1,468 - 1,468 Settlement of restricted stock units 165 - - - Issuance of restricted stock awards 35 - - - Dividends declared - - ( 6,207 ) ( 6,207 ) Purchase of stock ( 145 ) ( 2,171 ) - ( 2,171 ) Issuance of common stock for service 16 242 - 242 Balances at September 30, 2025 13,804 $ 3,757 $ 168,570 $ 172,327 See notes to Consolidated Condensed Financial Statements. 5 ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended All Amounts in Thousands September 30, 2025 September 30, 2024 Operating Activities: Net income $ 9,998 $ 10,286 Depreciation and amortization 3,767 4,691 Allowance for credit losses 630 574 Stock-based compensation 1,468 1,429 Loss (gain) on disposal of assets 7 ( 3,852 ) Common stock issued in lieu of bonus to officers 124 - Director stock compensation 118 - Changes in assets and liabilities 6 10,631 Net cash provided by operating activities 16,118 23,759 Investing Activities: Purchase of property and equipment ( 1,267 ) ( 1,482 ) Acquisition ( 1,800 ) - Proceeds from sale of property and equipment - 5,757 Net cash (used in) provided by investing activities ( 3,067 ) 4,275 Financing Activities: Proceeds from issuance of long-term debt 25,061 86,651 Payments on long-term debt ( 30,419 ) ( 108,051 ) Cash dividends paid ( 6,207 ) ( 6,224 ) Purchase of stock ( 2,171 ) - Net cash used in financing activities ( 13,736 ) ( 27,624 ) Net (decrease) increase in cash and cash equivalents ( 685 ) 410 Cash and cash equivalents, beginning of period 4,194 16 Cash and cash equivalents, end of period $ 3,509 $ 426 Supplemental Cash Flows Information Interest paid $ 627 $ 1,893 Income taxes paid, net $ 1,682 $ 3,380 See notes to Consolidated Condensed Financial Statements. 6 ESCALADE, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note A – Summary of Significant Accounting Policies Presentation of Consolidated Condensed Financial Statements – 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 its 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 consolidated condensed balance sheet of the Company as of December 31, 2024 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 (GAAP) have been condensed or omitted. 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. Goodwill – We perform our annual goodwill impairment analysis in the fourth quarter of each fiscal year, or more often if events or changes in circumstances indicate the carrying value of goodwill may not be recoverable, in accordance with guidance in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 350, “ Intangibles – Goodwill and Other ” (“ASC 350”). During the three months ended September 30, 2025, we identified a potential indicator of impairment due to the increase in tariff-related costs which led to the conclusion that a triggering event had occurred and therefore we performed a quantitative test for the single reporting unit. We measure the fair value of our reporting unit based on a guideline company method and discounted cash flow method using a discount rate determined by Management to be commensurate with the risk inherent in our reporting unit’s current business model. The fair market value was determined by weighting the two methods equally. Our estimates of discounted cash flows, selected multiples and market value of invested capital to derive the fair value were measured in accordance with ASC 350. Inputs to determine the fair value are considered to be level 3 inputs. We are using estimates of discounted cash flows that may change, and if they change negatively it could result in the need to write down those assets to fair value. Based on our interim impairment test of goodwill as of September 1, 2025, it was determined that the fair value of the reporting unit was in excess of the carrying value. Although there was no impairment of goodwill, we noted that the fair value of the reporting unit exceeded its carrying value by approximately 6%. If there is a continued increase in costs or other adverse events that could negatively impact the future cash flows of our business and its fair value, goodwill may be at risk of impairment in future periods. Note B ‑ Seasonal Aspects The results of operations for the three and nine months ended September 30, 2025 and September 30, 2024 are not necessarily indicative of the results to be expected for the full year. Note C ‑ Inventories In thousands September 30, 2025 December 31, 2024 September 30, 2024 Raw materials $ 3,700 $ 2,721 $ 3,663 Work in progress 3,447 2,370 2,948 Finished goods 73,515 70,934 78,874 $ 80,662 $ 76,025 $ 85,485 7 Note D – Fair Values of Financial Instruments ASC 820, “ Fair Value Measurement and Disclosures, ” outlines a valuation framework and creates a fair value hierarchy for assets and liabilities as follows: - Level 1: Observable inputs such as quoted prices in active markets; - Level 2: Inputs other than quoted prices in active markets that are either directly or indirectly observable; and - Level 3: 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, 2025, December 31, 2024 and September 30, 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, 2025 December 31, 2024 September 30, 2024 In thousands Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value Term Loan Facility $ 20,238 $ 19,231 $ 25,595 $ 23,528 $ 27,381 $ 25,275 Note E – Stock Compensation 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, 2025, the Company awarded 18,000 restricted stock units to directors, 105,181 restricted stock units and 35,000 shares of restricted stock 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. All of 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. The 35,000 shares of restricted stock vest on the fifth anniversary from the grant date provided that the employee is still employed by the Company on the vesting date. For the three and nine months ended September 30, 2025, the Company recognized stock based compensation expense of $ 506 thousand and $ 1,468 thousand, respectively compared to stock based compensation expense of $ 503 thousand and $ 1,429 thousand for the same periods in the prior year. At September 30, 2025 and September 30, 2024, there was $ 2.3 million and $ 1.8 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 September 30, 2025 is expected to be recognized over the weighted average period of 2.1 years. 8 Note F ‑ Segment Information 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 September 30, 2025 In thousands Sporting Goods Corp. Total Revenues from external customers $ 67,786 $ - $ 67,786 Cost of product sold 48,720 - 48,720 Other operating expenses 11,224 541 11,765 Operating income (loss) 7,842 ( 541 ) 7,301 Interest expense ( 204 ) - ( 204 ) Other income 21 - 21 Provision (benefit) for Income Taxes 2,103 ( 539 ) 1,564 Net income (loss) 5,556 ( 2 ) 5,554 Depreciation and Amortization $ 1,266 - $ 1,266 Total assets $ 226,362 $ 6,098 $ 232,460 As of and for the Nine Months Ended September 30, 2025 In thousands Sporting Goods Corp. Total Revenues from external customers $ 177,598 $ - $ 177,598 Cost of product sold 130,305 - 130,305 Other operating expenses 31,743 1,976 33,719 Operating income (loss) 15,550 ( 1,976 ) 13,574 Interest expense ( 661 ) - ( 661 ) Other income 103 - 103 Provision (benefit) for Income Taxes 4,119 ( 1,101 ) 3,018 Net income (loss) 10,873 ( 875 ) 9,998 Depreciation and Amortization $ 3,767 - $ 3,767 Total assets $ 226,362 $ 6,098 $ 232,460 As of and for the Three Months Ended September 30, 2024 In thousands Sporting Goods Corp. Total Revenues from external customers $ 67,738 $ - $ 67,738 Cost of product sold 50,947 - 50,947 Other operating expenses 8,035 782 8,817 Operating income (loss) 8,756 ( 782 ) 7,974 Interest expense ( 530 ) - ( 530 ) Other income 7 - 7 Provision (benefit) for Income Taxes 2,263 ( 479 ) 1,784 Net income (loss) 5,970 ( 303 ) 5,667 Depreciation and Amortization $ 1,940 - $ 1,940 Total assets $ 241,347 $ 3,583 $ 244,930 9 As of and for the Nine Months Ended September 30, 2024 In thousands Sporting Goods Corp. Total Revenues from external customers $ 187,568 $ - $ 187,568 Cost of product sold 141,312 - 141,312 Other operating expenses 28,294 2,471 30,765 Operating income (loss) 17,962 ( 2,471 ) 15,491 Interest expense ( 1,995 ) - ( 1,995 ) Other income 13 - 13 Provision (benefit) for Income Taxes 4,392 ( 1,169 ) 3,223 Net income (loss) 11,588 ( 1,302 ) 10,286 Depreciation and Amortization $ 4,691 - $ 4,691 Total assets $ 241,347 $ 3,583 $ 244,930 Note G – Dividend Payment On January 13, 2025, the Company paid a quarterly dividend of $ 0.15 per common share to all shareholders of record on January 6, 2025. The total amount of the dividend was approximately $ 2.1 million and was charged against retained earnings. On April 14, 2025, the Company paid a quarterly dividend of $ 0.15 per common share to all shareholders of record on April 7, 2025. The total amount of the dividend was approximately $ 2.1 million and was charged against retained earnings. On July 14, 2025, the Company paid a quarterly dividend of $ 0.15 per common share to all shareholders of record on July 7, 2025. The total amount of the dividend was approximately $ 2.1 million and was charged against retained earnings. On October 13, 2025, the Company paid a quarterly dividend of $ 0.15 per common share to all shareholders of record on October 6, 2025. The total amount of the dividend was approximately $ 2.1 million and was charged against retained earnings. Note H ‑ Earnings Per Share The shares used in computation of the Company’s basic and diluted earnings per common share are as follows: Three Months Ended Nine Months Ended In thousands September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Weighted average common shares outstanding 13,769 13,877 13,751 13,845 Dilutive effect of restricted stock units 102 156 121 162 Weighted average common shares outstanding, assuming dilution 13,871 14,033 13,872 14,007 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, 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. 10 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 Revenue Recognition – Revenue is recognized when a contract exists with a customer that specifies the goods to be provided at an agreed upon sales price and when the performance obligations under the terms of the contract are satisfied; generally, this occurs with the transfer of control of our goods at a point in time based on shipping terms and transfer of title. Sales are made on normal and customary short-term credit terms or upon delivery of point-of-sale transactions. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. The Company expenses incremental costs of obtaining a contract due to the short-term nature of the contracts. These costs are recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue. The Company enters into contractual arrangements with customers in the form of customer orders that specify goods, quantity, pricing, and associated order terms. The Company does not have long-term contracts that are satisfied over time. Due to the nature of the contracts, no significant judgment exists in relation to the identification of the customer contract, satisfaction of the performance obligations, or transaction price. Gross-to-net sales adjustments – We recognize revenue net of various sales adjustments to arrive at net sales as reported on the statement of operations. These adjustments are referred to as gross-to-net sales adjustments and primarily fall into one of three categories: returns, warranties and customer allowances. Returns – The Company records an accrued liability and reduction in sales for estimated product returns based upon historical experience. An accrued liability and reduction in sales is also recorded for approved return authorizations that have been communicated by the customer. Warranties – Limited warranties are provided on certain products for varying periods. We record an accrued liability and reduction in sales for estimated future warranty claims based upon historical experience and management’s estimate of the level of future claims. 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 $ 610 thousand as of September 30, 2025. There were no changes to the accrual due to a change in estimate during the current period. Customer Allowances – Customer allowances are common practice in the industries in which the Company operates. These agreements are typically in the form of advertising subsidies, volume rebates and catalog allowances and are accounted for as a reduction to gross sales. 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 $ 6,179 thousand, $ 6,708 thousand and $ 5,325 thousand as of September 30, 2025, December 31, 2024, and December 31, 2023. 11 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. These products are sold through multiple sales channels that include: mass merchants, specialty dealers, key on-line retailers (“E-commerce”) and international. The following table depicts the disaggregation of revenue according to sales channel: Three Months Ended Nine Months Ended All Amounts in Thousands September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Gross Sales by Channel: Mass Merchants $ 31,212 $ 32,725 $ 68,722 $ 72,877 Specialty Dealers 17,799 17,238 56,010 59,511 E-commerce 22,493 22,122 61,257 65,927 International 3,190 3,355 9,680 9,879 Other 601 881 2,247 2,683 Total Gross Sales 75,295 76,321 197,916 210,877 Less: Gross-to-Net Sales Adjustments Returns 2,002 2,650 5,089 6,451 Warranties 252 336 784 1,191 Customer Allowances 5,255 5,597 14,445 15,667 Total Gross-to-Net Sales Adjustments 7,509 8,583 20,318 23,309 Total Net Sales $ 67,786 $ 67,738 $ 177,598 $ 187,568 Note K – Leases We have operating leases for office, manufacturing and distribution facilities as well as for certain equipment. Our leases have remaining lease terms of 1 year to 4 years. As of September 30, 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 sheet. The Company has elected an accounting policy to not recognize short-term leases (one year or less) on the balance sheet. The Company also elected the package of practical expedients which applies to leases that commenced before the adoption date. By electing the package of practical expedients, the Company did not need to reassess the following; whether any existing contracts are or contain leases, the lease classification for any existing leases and initial direct costs for any existing leases. ROU assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. 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 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. 12 Components of lease expense and other information are as follows: Three Months Ended Nine Months Ended All Amounts in Thousands September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Lease Expense Operating Lease Cost $ 154 $ 374 $ 440 $ 1,125 Short-term Lease Cost 240 249 782 988 Variable Lease Cost 42 110 142 418 Total Operating Lease Cost $ 436 $ 733 $ 1,364 $ 2,531 Operating Lease – Operating Cash Flows $ 158 $ 267 $ 449 $ 782 New ROU Assets – Operating Leases $ 48 $ - $ 535 $ 52 Other information about lease amounts recognized in our consolidated condensed financial statements is summarized as follows: Nine Months Ended All Amounts in Thousands September 30, 2025 September 30, 2024 Weighted Average Remaining Lease Term – Operating Leases (in years) 3.08 7.47 Weighted Average Discount Rate – Operating Leases 6.68 % 5.18 % Future minimum lease payments under non-cancellable leases as of September 30, 2025 were as follows: All Amounts in Thousands Remainder of Year 1 $ 145 Year 2 569 Year 3 461 Year 4 191 Year 5 124 Thereafter 45 Total future minimum lease payments 1,535 Less imputed interest ( 153 ) Total $ 1,382 Reported as of September 30, 2025 Current operating lease liabilities 496 Long-term operating lease liabilities 886 Total $ 1,382 Note L – Commitments and Contingencies 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. 13 Note M – Debt 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 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, 2025. As of September 30, 2025, the outstanding principal amount of the term loan was $ 20.2 million and total amount drawn under the Revolving Facility was zero . The term loan and Revolving Facility have a maturity date of January 21, 2027. Note N – Provision for Taxes The effective tax rate for the three months ending September 30, 2025, was 22.0 % compared to 23.9 % for the same three month period last year. The effective tax rate for the first nine months ending September 30, 2025, was 23.2 % compared to 23.9 % for the same period last year. The lower tax rate for 2025 was primarily driven by tax windfall adjustments on stock incentives and favorable return to provision adjustments. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA includes changes such as provisions allowing accelerated tax deductions for qualified property and research expenditures and provides permanent extensions of certain expiring provisions of the Tax Cuts and Jobs Act. We are evaluating the impact of these provisions; however, there were no discrete effects in the third quarter, and we do not expect a material impact on our 2025 consolidated financial statements. Note O – Acquisition During the three months ended September 30, 2025, the Company acquired substantially all of the Gold Tip assets from Revelyst, Inc. Gold Tip is a leading brand for target archery, bow and crossbow hunting products. The Gold Tip assets acquired at close included $ 1.5 million in trademarks and immaterial amounts of other assets. The acquired trademarks will be amortized using the straight-line method over 20 years. This acquisition was not and would not have been material to the Company’s net sales, results of operations or total assets during the three months ended September 30, 2025. Accordingly, our consolidated results from operations do not differ materially from historical performance as a result of this acquisition, and therefore, pro-forma results are not presented. Note P – Subsequent Events On October 30, 2025, Escalade, Incorporated (“Escalade” or the “Company”) announced that Patrick J. Griffin, the Company’s Vice President, Corporate Development and Investor Relations and a Director, has been appointed as the Company’s Interim President and Chief Executive Officer effective October 29, 2025. Mr. Griffin replaces Armin Boehm, who resigned as of the same date. Mr. Griffin, age 56, has served as Director at Escalade and Vice President, Corporate Development and Investor Relations for Escalade since August 2012. Prior to that, Mr. Griffin served as President of Martin Yale Group, a former subsidiary of Escalade. Mr. Griffin has held various other roles at Escalade since 2002. 14