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Forward-Looking Statements
−Removed: 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.
+Added: 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 (the “Exchange Act”), and Rule 3b-6 promulgated thereunder.
All statements, other than statements of historical fact, are forward-looking statements.
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Escalade’s ability to achieve its business objectives;
+Added: Escalade’s plans and expectations surrounding the transition to its new Chief Executive Officer and all potential related effects and consequences;
+Added: Escalade’s ability to successfully implement actions to lessen the potential impacts of tariffs, a potential trade war with China 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;
+Added: our international operations, including any related to political uncertainty and geopolitical tensions;
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;
−Removed: Escalade’s plans and expectations surrounding the transition to its new Chief Executive Officer and all potential related effects and consequences;
+Added: Escalade’s ability to protect its intellectual property;
Escalade’s ability to develop and implement our own direct to consumer e-commerce distribution channel;
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the financial health of our customers;
−Removed: 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;
+Added: disruptions or delays in our business operations, including without limitation disruptions or delays in our supply chain, arising from political unrest, war, terrorist attacks, 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;
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Escalade’s ability to control costs, including managing inventory levels;
−Removed: 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;
−Removed: our international operations, including any related to political uncertainty and geopolitical tensions;
general economic conditions, including inflationary pressures;
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the potential impact of regulatory claims, proceedings or investigations involving our products;
+Added: Escalade’s use of estimates in its financial reporting as well as in its forward looking statements;
and other risks detailed from time to time in Escalade’s filings with the Securities and Exchange Commission.
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Significant synergies are achieved through assimilation of acquired product lines into the existing Company structure.
+Added: In September 2025, Escalade acquired the assets of Gold Tip, a leading brand of products for target archery and bow and crossbow hunting from Revelyst, Inc., strengthening the Company’s market position in archery.
+Added: In December 2025, Escalade acquired AllCornhole, a leading brand and supplier of cornhole bags and equipment for competitive cornhole play.
Management seeks acquisitions that strengthen the Company’s leadership in various product categories or provide entry into attractive new product categories.
The Company also sometimes divests or discontinues certain operations, assets, and products that do not perform to the Company's expectations or no longer fit with the Company's strategic objectives.
−Removed: Consistent with that philosophy, the Company completed the discontinuance of its Mexico operations and sale of its Mexican facilities in 2024.
+Added: Consistent with that philosophy, the Company completed the discontinuance of its Mexico operations, sale of its Mexican facilities, discontinuance of its Orlando, FL operations and terminated its long-term lease for the Orlando, FL facility in 2024.
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.
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Net sales decreased 4.5% in 2025 compared to 2024.
−Removed: The Company recognized declines in sales across multiple categories due to softer consumer demand, partially offset by improved demand in the archery, table tennis, and fitness categories.
+Added: The Company recognized declines in sales across multiple categories due to softer consumer demand, partially offset by improved demand in the archery, billiards, and fitness categories.
The overall gross margin increased to 26.9% in 2025 compared with 24.7% in 2024.
−Removed: Gross margins were favorably impacted by lower manufacturing and logistics costs.
+Added: Gross margins were favorably impacted by lower manufacturing costs due to a smaller operational footprint, when compared to the prior-year period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) were $43.6 million in 2025 compared to $43.3 million in 2024, an increase of $0.3 million or 0.7%.
−Removed: The increase in SG&A was primarily related to increased professional service costs during 2024.
+Added: The increase in SG&A was primarily related to CEO transition costs incurred during 2025.
SG&A as a percent of sales is 18.2% in 2025 compared with 17.2% in 2024.
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The effective tax rate for 2025 and 2024 was 24.0% and 26.9%, respectively.
+Added: The 2025 effective tax rate is higher than the federal statutory rate primarily due to the impact of state taxes and nondeductible expenses.
The 2024 effective tax rate is higher than the federal statutory rate primarily due to state income tax expense, nondeductible expenses, and the sale of Harvard Sports, partially offset by federal income tax credits.
−Removed: The 2023 effective tax rate was slightly higher than the federal statutory rate primarily due to the impact of state taxes partially offset by captive insurance premiums being tax exempt and federal income tax credits.
Sporting Goods
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Gross margin in 2025 was 26.9% compared to 24.7% in 2024.
−Removed: Operating income, as a percentage of net sales, increased to 9.2% in 2024 compared to 6.6% in 2023.
+Added: Operating income, as a percentage of net sales, decreased to 8.9% in 2025 compared to 9.2% in 2024.
Financial Condition and Liquidity
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Net inventory decreased $7.5 million to $68.5 million in 2025 from $76.0 million in 2024, due to continued efforts to right size our on hand inventory.
−Removed: Trade accounts payable and accrued liabilities increased $1.8 million to $26.9 million from $25.1 million in 2023.
+Added: Trade accounts payable and accrued liabilities decreased $4.1 million to $22.8 million from $26.9 million in 2024.
The Company’s working capital requirements are primarily funded through cash flows from operations and revolving credit agreements with its bank.
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The 2022 Restated Credit Agreement further extended the maturity date for the Company’s existing $50.0 million term loan facility to January 21, 2027.
−Removed: The October 11, 2024 amendments also eliminated the fixed charge coverage ratio covenant and related provisions.
+Added: On October 11, 2024, the Company entered into the Fifth Amendment to the 2022 Restated Credit Agreement.
+Added: This 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.
−Removed: The amendments 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.
+Added: The 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 December 31, 2025.
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The Company believes cash generated from its projected 2026 operations and the commitment of borrowings from its primary lender will provide it with sufficient cash flows for its operations.
+Added: The Company expects cash generated from 2026 and Q1 2027 operations will be sufficient to pay the remaining term loan balance of $11.3 million due on January 21, 2027.
It is possible that if economic conditions deteriorate, this could have adverse effects on the Company’s ability to operate profitably during fiscal year 2026.
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Of the total recorded goodwill of $42.3 million at December 31, 2025, the entire amount was allocated to the Escalade Sports reporting unit.
−Removed: The results of the quantitative impairment assessment of the Escalade Sports reporting unit indicated that the fair value of the reporting unit was greater than the carrying value as of November 1, 2024.
+Added: The results of the quantitative impairment assessment of the Escalade Sports reporting unit indicated that the fair value of the reporting unit was greater than the carrying value as of September 1, 2025.
+Added: The Company performed a qualitative assessment for the interim period from September 1, 2025 to December 31, 2025.
+Added: The results of the qualitative impairment assessment indicated that it was not “more likely than not” that the fair value of the reporting unit was less than the carrying value as of December 31, 2025.
Capital Expenditures
As of December 31, 2025, the Company had no material commitments for capital expenditures.
−Removed: In 2025, the Company estimates capital expenditures to be approximately $2.5 million.
+Added: In 2026, the Company has budgeted capital expenditures in the range of approximately $4.2 million to $5.2 million.
+Added: Actual expenditures may be higher or lower than budgeted amounts.
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK [Not Required]
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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.