SEC Form 10-Q filed by Escalade Incorporated

 

 

INDEX

 

		Page No.
Part I.	Financial Information:
Item 1 -	Financial Statements:
	Consolidated Condensed Balance Sheets as of March 31, 2025, December 31, 2024, and March 31, 2024	3
	Consolidated Condensed Statements of Operations for the Three Months Ended March 31, 2025 and March 31, 2024	4
	Consolidated Condensed Statements of Stockholders’ Equity for the Three Months Ended March 31, 2025 and March 31, 2024	5
	Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2025 and March 31, 2024	6
	Notes to Consolidated Condensed Financial Statements	7
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4 -	Controls and Procedures	15
Part II.	Other Information
Item 1 -	Legal Proceedings	16
Item 1A -	Risk Factors	16
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 6 -	Exhibits	18
	Signature	18

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.  FINANCIAL STATEMENTS

 

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

 

 

See notes to Consolidated Condensed Financial Statements.

 

 

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

See notes to Consolidated Condensed Financial Statements.

 

 

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

 

 

See notes to Consolidated Condensed Financial Statements.

 

 

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

See notes to Consolidated Condensed Financial Statements.

 

 

ESCALADE, INCORPORATED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

Note A – Summary of Significant Accounting Policies

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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.

 

Note B ‑ Seasonal Aspects

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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

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In thousands		March 31, 2025				December 31, 2024				March 31, 2024
Raw materials		$	2,743			$	2,721			$	3,665
Work in progress			2,441				2,370				2,595
Finished goods			71,817				70,934				89,731
		$	77,001			$	76,025			$	95,991

 

Note D – Fair Values of Financial Instruments

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Accounting Standard Codification (“ASC”) 820, “Fair Value Measurement and Disclosures,” outlines a valuation framework and creates a fair value hierarchy for assets and liabilities as follows:

 

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Level 1: Observable inputs such as quoted prices in active markets;

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Level 2: Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

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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 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:

 

		March 31, 2025								December 31, 2024								March 31, 2024
In thousands		Carrying Value				Fair Value				Carrying Value				Fair Value				Carrying Value				Fair Value
Term Loan Facility		$	23,810			$	22,197			$	25,595			$	23,528			$	30,952			$	27,844

 

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Note E – Stock Compensation

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

 

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.

 

Note F ‑ Segment Information

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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
In thousands		Sporting Goods				Corp.				Total
Revenues from external customers		$	55,479			$	–			$	55,479
Cost of product sold			40,689				–				40,689
Other operating expenses			10,314				824				11,138
Operating income (loss)			4,476				(824	)			3,652
Interest expense			(244	)			–				(244	)
Other income			31				–				31
Provision (benefit) for Income Taxes			1,172				(352	)			820
Net income (loss)			3,091				(472	)			2,619
Depreciation and Amortization		$	1,239				–			$	1,239
Total assets		$	218,079			$	3,995			$	222,074

 

		As of and for the Three Months Ended March 31, 2024
In thousands		Sporting Goods				Corp.				Total
Revenues from external customers		$	57,304			$	–			$	57,304
Cost of product sold			42,950				–				42,950
Other operating expenses			10,254				1,040				11,294
Operating income (loss)			4,100				(1,040	)			3,060
Interest expense			(735	)			–				(735	)
Other income			3				–				3
Provision (benefit) for Income Taxes			926				(373	)			553
Net income (loss)			2,442				(667	)			1,775
Depreciation and Amortization		$	1,373				–			$	1,373
Total assets		$	254,816			$	1,531			$	256,347

 

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Note G – Dividend Payment

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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.

 

Note H ‑ Earnings Per Share

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The shares used in computation of the Company’s basic and diluted earnings per common share are as follows:

 

		Three Months Ended
In thousands		March 31, 2025				March 31, 2024
Weighted average common shares outstanding			13,716				13,786
Dilutive effect of stock options and restricted stock units			163				104
Weighted average common shares outstanding, assuming dilution			13,879				13,890

 

Note I – New Accounting Standards and Changes in Accounting Principles

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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

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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.

 

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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 $608 thousand as of March 31, 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 $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. 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
All Amounts in Thousands		March 31, 2025				March 31, 2024
Gross Sales by Channel:
Mass Merchants		$	20,178			$	21,025
Specialty Dealers			20,567				20,995
E-commerce			16,264				18,363
International			3,698				2,856
Other			801				808
Total Gross Sales			61,508				64,047
Less: Gross-to-Net Sales Adjustments
Returns			1,540				1,836
Warranties			373				445
Customer Allowances			4,116				4,462
Total Gross-to-Net Sales Adjustments			6,029				6,743
Total Net Sales		$	55,479			$	57,304

 

Note K – Leases

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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 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 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.

 

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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.

 

Components of lease expense and other information is as follows:

 

		Three Months Ended
All Amounts in Thousands		March 31, 2025				March 31, 2024
Lease Expense
Operating Lease Cost		$	133			$	375
Short-term Lease Cost			228				357
Variable Lease Cost			42				165
Total Operating Lease Cost		$	403			$	897
Operating Lease – Operating Cash Flows		$	136			$	255
Weighted Average Remaining Lease Term – Operating Leases (years)			2.64				7.89
Weighted Average Discount Rate – Operating Leases			6.26	%			5.20	%

 

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

 

All Amounts in Thousands
Year 1		$	370
Year 2			442
Year 3			334
Year 4			65
Year 5			–
Thereafter			–
Total future minimum lease payments			1,211
Less imputed interest			(98	)
Total		$	1,113
Reported as of March 31, 2025
Current operating lease liabilities			426
Long-term operating lease liabilities			687
Total		$	1,113

 

Note L – Commitments and Contingencies

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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.

 

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Note M – Debt

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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 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

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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.

 

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Item 2.

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.

 

Overview

 

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
Net revenue			100.0%				100.0%
Cost of products sold			73.3%				75.0%
Gross margin			26.7%				25.0%
Selling, administrative and general expenses			19.1%				18.7%
Amortization			1.0%				1.0%
Operating income			6.6%				5.3%

 

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:

 

In thousands		March 31, 2025				December 31, 2024				March 31, 2024
Current portion of long-term debt		$	7,143			$	7,143			$	7,143
Long term debt			16,667				18,452				46,383
Total Debt		$	23,810			$	25,595			$	53,526

 

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 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 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.

 

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not Required.

 

Item 4.

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

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

 

PART II. OTHER INFORMATION

 

Item 1.  LEGAL PROCEEDINGS.

 

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

 

Item 1A.  RISK FACTORS.

 

In addition to the other information set forth in this report, you should carefully consider the risks and uncertainties disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. These risks and uncertainties could materially and adversely affect our business, consolidated financial condition, results of operations, or cash flows. Our operations could also be affected by additional risks or uncertainties that are not presently known to us or that we currently do not consider material to our business. As of the date of this filing, there have been no material changes in our risk factors from those disclosed in the above-referenced Form 10-K, which risk factors are incorporated herein by reference.

 

 

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

c) Issuer Purchases of Equity Securities

 

Period		(a) Total Number of Shares (or Units) Purchased				(b) Average Price Paid per Share (or Unit)				(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs				(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
Share purchases prior to 12/31/2024 under the current repurchase program.			2,297,715			$	13.50				2,297,715			$	1,958,823
First quarter purchases:
1/1/2025-1/31/2025			55,962			$	14.85				2,353,677			$	1,127,909
2/1/2025-2/28/2025			31,030			$	15.29				2,384,707			$	20,000,000
3/1/2025-3/31/2025			5,084			$	14.87				2,389,791			$	19,924,407
Total share purchases under the current program			2,389,791			$	13.55				2,389,791			$	19,924,407

 

The Company has one stock repurchase program which was established in February 2003 by the Board of Directors and which initially authorized management to expend up to $3,000,000 to repurchase shares on the open market as well as in private negotiated transactions. Since the program’s inception, the Board has replenished and increased the dollar amount of authorized stock repurchases on multiple occasions. Most recently, in February 2025, the Board of Directors increased the stock repurchase program to $20,000,000. From its inception date through March 31, 2025, the Company has repurchased 2,389,791 shares of its common stock under this repurchase program for an aggregate price of $32,387,923. The repurchase program has no termination date and there have been no share repurchases that were not part of a publicly announced program.

 

 

Item 3.  DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

Item 4.  MINE SAFETY DISCLOSURES.

 

Not applicable.

 

Item 5.  OTHER INFORMATION.

 

None.

 

17

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Item 6.  EXHIBITS

 

Number	Description
3.1	Articles of Incorporation of Escalade, Incorporated. Incorporated by reference from Exhibit 3.1 to the Company’s 2007 First Quarter Report on Form 10-Q filed on April 13, 2007.
3.2	Amended By-laws of Escalade, Incorporated, as amended August 10, 2022. Incorporated by reference from Exhibit 3.2 to the Company’s 2022 Third Quarter Report on Form 10-Q filed on October 27, 2022.
10.1	Offer Letter executed January 31, 2025, by and between Armin Boehm and Escalade, Incorporated. Incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 6, 2025.
10.2	Executive Severance Agreement executed January 31, 2025, to be effective as of April 1, 2025, by and between Armin Boehm and Escalade, Incorporated. Incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 6, 2025.
31.1	Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification.
31.2	Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification.
32.1	Chief Executive Officer Section 1350 Certification.
32.2	Chief Financial Officer Section 1350 Certification.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

ESCALADE, INCORPORATED

 

 

 

Date:     May 5, 2025	/s/ Stephen R. Wawrin
	Vice President and Chief Financial Officer
	(On behalf of the registrant and in his
	capacities as Principal Financial Officer
	and Principal Accounting Officer)