Financial Data and Key Metrics Changes - For Q2 2025, the company reported net income of $1.8 million or $0.13 per diluted share on net sales of $54.3 million, reflecting a year-over-year decline of approximately 13% in net sales [14] - Gross margins increased to 24.7% from 24.2% in the prior year, driven by lower operational costs from facility consolidation and cost rationalization [14] - Earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased by $1.9 million to $3.9 million compared to the prior year [15] - Total cash provided by operations remained flat at $13.3 million, with a reduction in working capital needs due to lower inventory and accounts receivable levels [15] Business Line Data and Key Metrics Changes - The company faced a $1.6 million headwind from tariffs, which negatively impacted gross margin by approximately 200 basis points [14] - Inventory was reduced by approximately $14 million compared to the prior year, enhancing flexibility in navigating sourcing challenges [5] Market Data and Key Metrics Changes - Consumer sentiment remains below historical averages, with concerns about tariffs, inflation, and a potential economic slowdown affecting discretionary spending [7] - Elevated interest rates and a stagnant housing market have negatively impacted sales in indoor and outdoor recreational categories [8] Company Strategy and Development Direction - The company is focused on strengthening supply chain resiliency, increasing U.S.-based manufacturing capacity, and implementing measures to mitigate tariff impacts [6] - Continued investment in product innovation is emphasized, with new product launches planned for the second half of the year [10] Management's Comments on Operating Environment and Future Outlook - Management noted that the current operating environment is challenging due to consumer behavior changes and tariff impacts, but the company is well-positioned to navigate these challenges [9] - The strategic groundwork laid in previous years is expected to enable the company to capitalize on market share opportunities as demand recovers [13] Other Important Information - The company repaid approximately $2 million in debt, reducing net leverage to 0.5 times trailing twelve months EBITDA, and repurchased nearly $800,000 of shares [12] - The company is evaluating strategic acquisition opportunities to expand its presence in core categories [13] Q&A Session Summary Question: Impact of tariff and retail inventory situation on new product launches - Management confirmed that they are working closely with key accounts for a strong holiday season and will not change their product launch cadence, instead accelerating new product introductions [19][20] Question: Details on unfavorable product mix affecting gross margins - Management indicated that weather conditions impacted sales of basketball and outdoor recreational products, and tariff situations affected shipment timing, contributing to the unfavorable product mix [23][24]

PART I. FINANCIAL INFORMATION [Item 1 - Financial Statements](index=3&type=section&id=Item%201%20-%20Financial%20Statements) This section presents the company's consolidated condensed financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, financial instrument fair values, stock-based compensation, segment reporting, revenue recognition, leases, debt, and tax provisions [Consolidated Condensed Balance Sheets](index=3&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) | Metric (Thousands) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :----------------- | :------------ | :---------------- | :------------ | | Cash and cash equivalents | $10,422 | $4,194 | $362 | | Total Current Assets | $127,871 | $133,824 | $139,052 | | Total Assets | $218,339 | $226,330 | $243,066 | | Total Current Liabilities | $30,845 | $34,495 | $30,240 | | Total Liabilities | $50,001 | $57,333 | $77,084 | | Total Stockholders' Equity | $168,338 | $168,997 | $165,982 | - Cash and cash equivalents significantly increased to **$10,422 thousand** at June 30, 2025, from **$4,194 thousand** at December 31, 2024[10](index=10&type=chunk) - Total assets decreased by approximately **$8 million** from December 31, 2024, to June 30, 2025, while total liabilities decreased by approximately **$7.3 million** over the same period[10](index=10&type=chunk) [Consolidated Condensed Statements of Operations](index=4&type=section&id=Consolidated%20Condensed%20Statements%20of%20Operations) Net Sales and Net Income (Thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $54,333 | $62,526 | $109,812 | $119,830 | | Net Income | $1,825 | $2,844 | $4,444 | $4,619 | Earnings Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.13 | $0.21 | $0.32 | $0.33 | | Diluted EPS | $0.13 | $0.20 | $0.32 | $0.33 | | Dividends declared | $0.15 | $0.15 | $0.30 | $0.30 | - Net sales decreased by **13.1%** for the three months and **8.4%** for the six months ended June 30, 2025, compared to the prior year[11](index=11&type=chunk) - Net income decreased by **35.8%** for the three months and **3.8%** for the six months ended June 30, 2025, compared to the prior year[11](index=11&type=chunk) [Consolidated Condensed Statements of Stockholders' Equity](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Stockholders%27%20Equity) Stockholders' Equity Changes (Six Months Ended June 30, 2025, Thousands) | Item (Thousands) | Amount | | :----------------- | :----- | | Balances at December 31, 2024 | $168,997 | | Net income | $4,444 | | Expense of restricted stock units | $962 | | Dividends declared | $(4,136) | | Purchase of stock | $(2,171) | | Issuance of common stock for service | $242 | | Balances at June 30, 2025 | $168,338 | - Total stockholders' equity decreased slightly from **$168,997 thousand** at December 31, 2024, to **$168,338 thousand** at June 30, 2025[13](index=13&type=chunk) - The company purchased **$2,171 thousand** of stock and declared **$4,136 thousand** in dividends during the six months ended June 30, 2025[13](index=13&type=chunk) [Consolidated Condensed Statements of Cash Flows](index=6&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) Cash Flow Summary (Six Months Ended June 30, Thousands) | Activity | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Net cash provided by operating activities | $17,083 | $13,299 | | Net cash used in investing activities | $(976) | $(1,082) | | Net cash used in financing activities | $(9,879) | $(11,871) | | Net increase in cash and cash equivalents | $6,228 | $346 | | Cash and cash equivalents, end of period | $10,422 | $362 | - Net cash provided by operating activities increased by **$3,784 thousand (28.4%)** for the six months ended June 30, 2025, compared to the prior year[14](index=14&type=chunk) - Cash and cash equivalents at the end of the period significantly increased to **$10,422 thousand** in 2025 from **$362 thousand** in 2024[14](index=14&type=chunk) [Notes to Consolidated Condensed Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Condensed%20Financial%20Statements) - The financial statements provide a condensed view of the company's financial position and performance, with detailed notes offering crucial context to the reported figures and accounting practices[16](index=16&type=chunk) - The company operates as a single operating segment, 'Sporting Goods,' with all external revenues derived from this segment[26](index=26&type=chunk)[28](index=28&type=chunk) - Revenue recognition is primarily at a point in time when control of goods transfers to customers, typically based on shipping terms[34](index=34&type=chunk) [Note A – Summary of Significant Accounting Policies](index=7&type=section&id=Note%20A%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) - The company's interim financial reporting policies are consistent with its annual financial reporting policies[16](index=16&type=chunk) - These condensed financial statements should be read in conjunction with the consolidated financial statements and notes in the Company's 2024 Form 10-K[16](index=16&type=chunk) [Note B ‑ Seasonal Aspects](index=7&type=section&id=Note%20B%20%E2%80%93%20Seasonal%20Aspects) - Results for the three and six months ended June 30, 2025 and 2024, are not necessarily indicative of full-year results, suggesting potential seasonality[17](index=17&type=chunk) [Note C ‑ Inventories](index=7&type=section&id=Note%20C%20%E2%80%93%20Inventories) Inventories (Thousands) | Category | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--------- | :------------ | :---------------- | :------------ | | Raw materials | $3,843 | $2,721 | $3,629 | | Work in progress | $2,936 | $2,370 | $2,576 | | Finished goods | $65,893 | $70,934 | $80,366 | | **Total** | **$72,672** | **$76,025** | **$86,571** | - Total inventories decreased by **$3,353 thousand** from December 31, 2024, to June 30, 2025, primarily due to a reduction in finished goods[18](index=18&type=chunk) [Note D – Fair Values of Financial Instruments](index=7&type=section&id=Note%20D%20%E2%80%93%20Fair%20Values%20of%20Financial%20Instruments) - The fair value of cash and cash equivalents, accounts receivable, accounts payable, and certain other liabilities approximated their carrying values due to their short-term nature[19](index=19&type=chunk) Term Loan Facility Fair Value (Thousands) | Date | Carrying Value | Fair Value | | :--- | :------------- | :--------- | | June 30, 2025 | $22,024 | $20,744 | | December 31, 2024 | $25,595 | $23,528 | | June 30, 2024 | $29,167 | $26,390 | - The fair value of the term loan is estimated using Level 2 inputs, such as treasury rates for similar instruments[20](index=20&type=chunk)[21](index=21&type=chunk) [Note E – Stock-Based Compensation](index=8&type=section&id=Note%20E%20%E2%80%93%20Stock-Based%20Compensation) - During the six months ended June 30, 2025, the Company awarded **18,000 restricted stock units** to directors, and **105,181 restricted stock units** and **35,000 shares of restricted stock** to employees[23](index=23&type=chunk) Stock-Based Compensation Expense (Thousands) | Period | 2025 | 2024 | | :----- | :--- | :--- | | Three Months Ended June 30 | $495 | $497 | | Six Months Ended June 30 | $962 | $926 | - As of June 30, 2025, there was **$2.8 million** in unrecognized stock-based compensation expense related to non-vested stock awards, expected to be recognized over a weighted average period of **2.2 years**[25](index=25&type=chunk) [Note F ‑ Segment Information](index=8&type=section&id=Note%20F%20%E2%80%93%20Segment%20Information) - The Company operates as one operating segment, 'Sporting Goods,' with its chief operating decision maker reviewing consolidated financial information[26](index=26&type=chunk) Segment Net Income (Loss) (Six Months Ended June 30, 2025, Thousands) | Segment | Net Income (Loss) | | :-------- | :---------------- | | Sporting Goods | $5,317 | | Corp. | $(873) | | **Total** | **$4,444** | - All revenues from external customers for both the three and six months ended June 30, 2025, were generated by the Sporting Goods segment[27](index=27&type=chunk)[28](index=28&type=chunk) [Note G – Dividend Payment](index=9&type=section&id=Note%20G%20%E2%80%93%20Dividend%20Payment) - The Company paid quarterly dividends of **$0.15 per common share** on January 13, 2025, April 14, 2025, and July 14, 2025[29](index=29&type=chunk)[30](index=30&type=chunk) - Each quarterly dividend payment amounted to approximately **$2.1 million** and was charged against retained earnings[29](index=29&type=chunk)[30](index=30&type=chunk) [Note H ‑ Earnings Per Share](index=10&type=section&id=Note%20H%20%E2%80%93%20Earnings%20Per%20Share) Weighted Average Common Shares Outstanding (Thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | 13,769 | 13,871 | 13,742 | 13,828 | | Diluted | 13,908 | 14,054 | 13,883 | 14,023 | - Dilutive effects of stock options and restricted stock units added **139 thousand shares** for the three months and **141 thousand shares** for the six months ended June 30, 2025[31](index=31&type=chunk) [Note I – New Accounting Standards and Changes in Accounting Principles](index=10&type=section&id=Note%20I%20%E2%80%93%20New%20Accounting%20Standards%20and%20Changes%20in%20Accounting%20Principles) - The Company is currently evaluating the impact of ASU 2023-09, 'Improvements to Income Tax Disclosures,' issued in December 2023[33](index=33&type=chunk) - ASU 2023-09 expands disclosures for income tax rate reconciliation and requires disclosure of income taxes paid in U.S. and foreign jurisdictions, effective for fiscal years beginning after December 15, 2024[33](index=33&type=chunk) [Note J – Revenue from Contracts with Customers](index=10&type=section&id=Note%20J%20%E2%80%93%20Revenue%20from%20Contracts%20with%20Customers) - Revenue is recognized when performance obligations are satisfied, generally with the transfer of control of goods at a point in time based on shipping terms[34](index=34&type=chunk) Total Net Sales by Period (Thousands) | Period | 2025 | 2024 | | :----- | :--- | :--- | | Three Months Ended June 30 | $54,333 | $62,526 | | Six Months Ended June 30 | $109,812 | $119,830 | Gross Sales by Channel (Six Months Ended June 30, Thousands) | Channel | 2025 | 2024 | | :---------------- | :----- | :----- | | Mass Merchants | $37,510 | $40,152 | | Specialty Dealers | $38,211 | $42,273 | | E-commerce | $38,764 | $43,805 | | International | $6,490 | $6,524 | | Other | $1,646 | $1,802 | | **Total Gross Sales** | **$122,621** | **$134,556** | [Note K – Leases](index=11&type=section&id=Note%20K%20%E2%80%93%20Leases) - The Company has operating leases for office, manufacturing, and distribution facilities, as well as certain equipment, with remaining lease terms of **1 to 4 years**[42](index=42&type=chunk) Total Operating Lease Cost (Thousands) | Period | 2025 | 2024 | | :----- | :--- | :--- | | Three Months Ended June 30 | $525 | $901 | | Six Months Ended June 30 | $928 | $1,798 | - The weighted average remaining lease term for operating leases was **3.20 years**, and the weighted average discount rate was **6.61%** as of June 30, 2025[45](index=45&type=chunk) [Note L – Commitments and Contingencies](index=13&type=section&id=Note%20L%20%E2%80%93%20Commitments%20and%20Contingencies) - The Company is involved in litigation in the normal course of business but does not believe the disposition of such claims will have a material adverse effect on its business or financial condition[47](index=47&type=chunk) [Note M – Debt](index=13&type=section&id=Note%20M%20%E2%80%93%20Debt) - Total debt was **$22.0 million** as of June 30, 2025, a decrease of **$3.6 million** from December 31, 2024[49](index=49&type=chunk)[64](index=64&type=chunk) - The Fifth Amendment to the Credit Agreement (October 2024) replaced the fixed charge coverage ratio with a minimum interest coverage ratio of **3.50 to 1:00**[48](index=48&type=chunk)[65](index=65&type=chunk) - The maximum availability under the senior revolving credit facility was decreased to **$60.0 million**, with an accordion feature allowing an increase up to **$85.0 million**[48](index=48&type=chunk)[65](index=65&type=chunk) - The Company was in compliance with all debt covenants as of June 30, 2025[49](index=49&type=chunk)[66](index=66&type=chunk) [Note N – Provision for Taxes](index=13&type=section&id=Note%20N%20%E2%80%93%20Provision%20for%20Taxes) Effective Tax Rate | Period | 2025 | 2024 | | :----- | :--- | :--- | | Three Months Ended June 30 | 25.8% | 23.8% | | Six Months Ended June 30 | 24.7% | 23.8% | - The effective tax rate increased for both the three and six months ended June 30, 2025, compared to the prior year periods[50](index=50&type=chunk)[63](index=63&type=chunk) [Note O – Subsequent Events](index=13&type=section&id=Note%20O%20%E2%80%93%20Subsequent%20Events) - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2024, including changes to accelerated tax deductions and permanent extensions of certain Tax Cuts and Jobs Act provisions[51](index=51&type=chunk) - The Company is currently evaluating the impact of the OBBBA on its consolidated financial statements[51](index=51&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, highlighting a decrease in net sales and net income for the quarter and six months ended June 30, 2025, primarily due to softer market demand. Despite sales challenges, gross margin improved due to cost management. The company's strategic focus remains on growing its Sporting Goods business through organic growth, acquisitions, and new product development, while managing debt and liquidity effectively - Net sales decreased **13.1%** for the second quarter of 2025 and **8.4%** for the six months ended June 30, 2025, primarily due to softer market demand and delayed customer shipments[60](index=60&type=chunk) - Gross margin increased to **24.7%** for Q2 2025 and **25.7%** for H1 2025, driven by lower fixed costs and decreased inventory storage and handling costs, partially offset by tariff-related costs[61](index=61&type=chunk) - Total debt decreased to **$22.0 million** as of June 30, 2025, representing **13.1%** of stockholders' equity, and the company was in compliance with all debt covenants[64](index=64&type=chunk)[66](index=66&type=chunk) - The company expects cash generated from 2025 operations and access to revolving credit to provide sufficient cash flows for operations and growth needs[67](index=67&type=chunk) [Forward-Looking Statements](index=14&type=section&id=Forward-Looking%20Statements) - This report contains forward-looking statements subject to various risks and uncertainties, including those related to business objectives, tariffs, international operations, and economic conditions[52](index=52&type=chunk) - Escalade's future financial performance could differ materially from management's expectations, and the company undertakes no obligation to release revisions to these statements[52](index=52&type=chunk) [Overview](index=14&type=section&id=Overview) - Escalade is focused on growing its Sporting Goods business through organic growth, strategic acquisitions, and new product development[53](index=53&type=chunk) - The company leverages strong brands, established customer relationships, and manufacturing/import experience to be a low-cost supplier[55](index=55&type=chunk) - Key indicators of success include revenue growth, earnings growth, new product introductions, and expansion of distribution channels[57](index=57&type=chunk) - Management acknowledges potential adverse impacts from tariffs, trade wars, inflation, rising interest rates, and declining consumer confidence[58](index=58&type=chunk) [Results of Operations](index=15&type=section&id=Results%20of%20Operations) [Revenue and Gross Margin](index=15&type=section&id=Revenue%20and%20Gross%20Margin) - Sales decreased **13.1%** for Q2 2025 and **8.4%** for H1 2025 compared to the prior year, primarily due to softer market demand and delayed customer shipments[60](index=60&type=chunk) - Gross margin increased by **56 basis points** to **24.7%** for Q2 2025 and to **25.7%** for H1 2025, driven by lower fixed costs and decreased inventory storage and handling costs[61](index=61&type=chunk) - Tariff-related costs and unfavorable product mix partially offset the gross margin improvements[61](index=61&type=chunk) [Selling, General and Administrative Expenses](index=16&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) - Selling, general and administrative (SG&A) expenses increased by **$0.1 million (1.8%)** to **$10.2 million** for Q2 2025, resulting in an increase to **18.9% of sales** from **16.1%** in Q2 2024[62](index=62&type=chunk) - For the six months ended June 30, 2025, SG&A expenses remained stable at **$20.8 million** compared to the prior year[62](index=62&type=chunk) [Provision (Benefit) for Income Taxes](index=16&type=section&id=Provision%20%28Benefit%29%20for%20Income%20Taxes) Effective Tax Rate | Period | 2025 | 2024 | | :----- | :--- | :--- | | Three Months Ended June 30 | 25.8% | 23.8% | | Six Months Ended June 30 | 24.7% | 23.8% | - The effective tax rate increased for both the three and six months ended June 30, 2025, compared to the same periods in the prior year[63](index=63&type=chunk) [Financial Condition and Liquidity](index=16&type=section&id=Financial%20Condition%20and%20Liquidity) Total Debt (Thousands) | Date | Total Debt | | :--- | :--------- | | June 30, 2025 | $22,024 | | December 31, 2024 | $25,595 | | June 30, 2024 | $43,167 | - Total debt decreased by **$3.6 million** to **$22.0 million** as of June 30, 2025, representing **13.1%** of stockholders' equity[64](index=64&type=chunk) - The company amended its credit agreement in October 2024, replacing the fixed charge coverage ratio with a minimum interest coverage ratio of **3.50 to 1:00** and adjusting the revolving credit facility[65](index=65&type=chunk) - Escalade was in compliance with all debt covenants as of June 30, 2025, and expects sufficient cash flows from operations and revolving credit for future needs[66](index=66&type=chunk)[67](index=67&type=chunk) [Item 3 - Quantitative and Qualitative Disclosures About Market Risk](index=16&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is marked as 'Not Required' in the report - This item is explicitly stated as 'Not Required' in the filing[68](index=68&type=chunk) [Item 4 - Controls and Procedures](index=17&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they were effective. No material changes in internal control over financial reporting occurred during the second quarter of 2025 - The company's disclosure controls and procedures were evaluated and concluded to be effective as of June 30, 2025[70](index=70&type=chunk) - No material changes in internal control over financial reporting occurred during the second quarter of 2025[72](index=72&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=17&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Disclosure controls and procedures are designed to ensure timely and accurate reporting of information required in Exchange Act reports[69](index=69&type=chunk) - The CEO and CFO participated in the evaluation and concluded that the disclosure controls and procedures were effective as of June 30, 2025[70](index=70&type=chunk) [Changes in Internal Control over Financial Reporting](index=17&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - Management, with CEO and CFO participation, evaluated changes in internal controls over financial reporting during Q2 2025[71](index=71&type=chunk) - There have been no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during Q2 2025[72](index=72&type=chunk) PART II. OTHER INFORMATION [Item 1 - Legal Proceedings](index=17&type=section&id=Item%201%20-%20Legal%20Proceedings) The company refers to Note L of the Consolidated Condensed Financial Statements for information on legal proceedings, indicating that no material adverse effect on its business or financial condition is anticipated from existing litigation - Information regarding legal proceedings is incorporated by reference from Note L of the Notes to Consolidated Condensed Financial Statements[73](index=73&type=chunk) - The company does not believe the disposition or ultimate resolution of existing claims or lawsuits will have a material adverse effect on its business or financial condition[47](index=47&type=chunk) [Item 1A - Risk Factors](index=17&type=section&id=Item%201A%20-%20Risk%20Factors) The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which are incorporated by reference into this report - No material changes in risk factors have occurred since the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[74](index=74&type=chunk) - The risk factors from the aforementioned Form 10-K are incorporated by reference[74](index=74&type=chunk) [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](index=18&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase program, which was increased to $20 million in February 2025. As of June 30, 2025, the company had repurchased 2,443,316 shares for an aggregate price of $33,178,513 under this program, with $19,133,817 remaining authorized for future repurchases - The Board of Directors increased the stock repurchase program to **$20,000,000** in February 2025[75](index=75&type=chunk) Stock Repurchase Program Summary (as of June 30, 2025) | Metric | Value | | :------------------------------------------------ | :---------- | | Total shares purchased under current program | 2,443,316 | | Aggregate price paid under current program | $33,178,513 | | Maximum dollar value of shares yet to be purchased | $19,133,817 | - No shares were repurchased during June 2025[75](index=75&type=chunk) [Item 3 - Defaults Upon Senior Securities](index=18&type=section&id=Item%203%20-%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities for the period - There were no defaults upon senior securities[77](index=77&type=chunk) [Item 4 - Mine Safety Disclosures](index=18&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) This item is marked as 'Not applicable' in the report - This item is explicitly stated as 'Not applicable' in the filing[77](index=77&type=chunk) [Item 5 - Other Information](index=18&type=section&id=Item%205%20-%20Other%20Information) The company reported no other information for the period - There is no other information to report[78](index=78&type=chunk) [Item 6 - Exhibits](index=19&type=section&id=Item%206%20-%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, CEO and CFO certifications, and XBRL interactive data files - Exhibits include Articles of Incorporation, Amended By-laws, CEO and CFO certifications (Rule 13a-14(a)/15d-14(a) and Section 1350), and various Inline XBRL Taxonomy documents[82](index=82&type=chunk) [Signature](index=19&type=section&id=Signature) - The report was signed on August 1, 2025, by Stephen R. Wawrin, Vice President and Chief Financial Officer[82](index=82&type=chunk)

Escalade Second Quarter 2025 Earnings Release [Financial & Operational Highlights](index=1&type=section&id=SECOND%20QUARTER%202025%20HIGHLIGHTS) Escalade's Q2 2025 net sales decreased 13.1% to $54.3 million, yet gross margin improved to 24.7%, and total debt significantly reduced by 49.0% to $22.0 million Q2 2025 vs Q2 2024 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $54.3M | $62.5M | -13.1% | | Gross Margin | 24.7% | 24.2% | +50 bps | | Operating Income | $2.6M | $4.5M | -42.2% | | Net Income | $1.8M | $2.8M | -35.7% | | Diluted EPS | $0.13 | $0.20 | -35.0% | | EBITDA | $3.9M | $5.8M | -32.8% | - The decrease in net sales was primarily due to softer market demand and delayed customer shipments related to tariff volatility, partially offset by market share gains in the safety category[3](index=3&type=chunk) - The company significantly improved its financial position, reducing total debt by **49.0% YoY** to **$22.0 million**. The net debt to trailing twelve-month EBITDA ratio improved from **1.7x to 0.5x**[7](index=7&type=chunk)[9](index=9&type=chunk) - Cash flow from operations remained strong at **$13.3 million**, consistent with the prior year, as reduced profitability was offset by cash generated from inventory rationalization initiatives[6](index=6&type=chunk) - A quarterly dividend of **$0.15 per share** was announced, payable on October 13, 2025, to shareholders of record on October 6, 2025[8](index=8&type=chunk) [Management Commentary](index=2&type=section&id=MANAGEMENT%20COMMENTARY) Management highlighted improved gross margin despite lower sales and tariff costs, attributing sales decline to cautious consumers and unfavorable weather, while focusing on supply chain efficiency and disciplined capital allocation - Despite a soft market, the company delivered year-over-year gross margin improvement, even after absorbing **$1.6 million** in tariff-related costs, thanks to a leaner cost structure[10](index=10&type=chunk) - Sales performance was negatively impacted by a cautious consumer demand environment, changing customer buying patterns, the strategic exit of select product categories, and unfavorable weather[10](index=10&type=chunk) - Future strategy involves collaborating with retail and supply partners to improve supply chain efficiency and implementing targeted price increases to mitigate ongoing tariff headwinds[10](index=10&type=chunk) - Capital allocation priorities include share repurchases (**$0.8 million** in Q2), debt reduction (down **49.0% YoY**), returning capital to shareholders via dividends, and investing in product innovation[10](index=10&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2025, and 2024, including Statements of Operations, Balance Sheets, and Statements of Cash Flows [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For Q2 2025, net sales decreased to $54.3 million, leading to a decline in operating income to $2.6 million and net income to $1.8 million, or $0.13 per diluted share Q2 Statement of Operations (in thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $54,333 | $62,526 | | Cost of products sold | $40,896 | $47,415 | | Operating Income | $2,621 | $4,457 | | Net Income | $1,825 | $2,844 | | Diluted EPS | $0.13 | $0.20 | Six Months Statement of Operations (in thousands) | Account | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net sales | $109,812 | $119,830 | | Operating Income | $6,273 | $7,517 | | Net Income | $4,444 | $4,619 | | Diluted EPS | $0.32 | $0.33 | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets decreased to $218.3 million, driven by reduced inventories, while total liabilities significantly decreased to $50.0 million due to lower long-term debt, and cash increased to $10.4 million Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,422 | $362 | | Inventories | $72,672 | $86,571 | | TOTAL ASSETS | $218,339 | $243,066 | | Long‑term debt | $14,881 | $36,024 | | TOTAL LIABILITIES | $50,001 | $77,084 | | TOTAL STOCKHOLDERS' EQUITY | $168,338 | $165,982 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, operating cash flow increased to $17.1 million, while financing activities used $9.9 million, resulting in an improved cash position of $10.4 million Six Months Cash Flows (in thousands) | Activity | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,083 | $13,299 | | Net cash used in investing activities | ($976) | ($1,082) | | Net cash used in financing activities | ($9,879) | ($11,871) | | Net increase in cash and cash equivalents | $6,228 | $346 | | Cash and cash equivalents, end of period | $10,422 | $362 | [Supplementary Information](index=3&type=section&id=Supplementary%20Information) This section provides supplementary details including investor conference call information, a reconciliation of GAAP Net Income to non-GAAP EBITDA, a business description, and forward-looking statement disclaimers [Reconciliation of GAAP Net Income to Non-GAAP EBITDA](index=8&type=section&id=Reconciliation%20of%20GAAP%20Net%20Income%20to%20Non-GAAP%20EBITDA) The company provides a reconciliation from GAAP Net Income to non-GAAP EBITDA, with Q2 2025 EBITDA at $3.9 million and six-month EBITDA at $8.9 million EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (GAAP) | $1,825 | $2,844 | $4,444 | $4,619 | | Interest expense | $213 | $730 | $457 | $1,465 | | Income tax expense | $634 | $886 | $1,454 | $1,439 | | Depreciation and amortization | $1,262 | $1,378 | $2,501 | $2,751 | | **EBITDA (Non-GAAP)** | **$3,934** | **$5,838** | **$8,856** | **$10,274** | [Conference Call Information](index=3&type=section&id=CONFERENCE%20CALL) The company will host a conference call on Friday, August 1, 2025, at 11:00 a.m. ET to review its financial results, with dial-in and webcast details provided - A conference call to review financial results is scheduled for Friday, August 1, 2025, at **11:00 a.m. ET**[11](index=11&type=chunk) - Webcast and presentation materials will be available in the Investor Relations section of Escalade's website, with specific dial-in and replay numbers for the teleconference[12](index=12&type=chunk) [Forward-Looking Statements & Non-GAAP Disclosures](index=3&type=section&id=Disclosures) This section contains standard legal disclaimers regarding forward-looking statements and explains the company's use of non-GAAP EBITDA as a supplementary financial measure - The company uses the non-GAAP financial measure EBITDA to facilitate comparisons of operating performance across periods and believes it provides useful information to investors[13](index=13&type=chunk) - The report contains forward-looking statements that are subject to numerous risks, including the company's ability to lessen the impact of tariffs, manage supply chain disruptions, and adapt to shifting consumer buying habits[16](index=16&type=chunk)

Core Insights - Escalade, Inc. reported a net sales decrease of 13.1% year-over-year for Q2 2025, totaling $54.3 million, attributed to softer market demand and delayed shipments due to tariff volatility, although there were market share gains in the safety category [2][8] - The company achieved a gross margin of 24.7%, an increase of 56 basis points from the previous year, driven by lower fixed costs and reduced inventory handling costs, despite facing tariff-related costs [3][9] - EBITDA decreased to $3.9 million from $5.8 million in the prior year, reflecting lower net sales and non-recurring executive transition expenses [4][9] Financial Performance - Net income for Q2 2025 was $1.8 million, or $0.13 per diluted share, down from $2.8 million, or $0.20 per diluted share in Q2 2024 [9][18] - Operating income fell to $2.6 million compared to $4.5 million in the same quarter last year [9][18] - Cash flow from operations remained stable at $13.3 million, reflecting reduced profitability offset by working capital improvements [5] Debt and Cash Position - Total debt decreased by 49.0% to $22.0 million from $43.2 million year-over-year [6][9] - As of June 30, 2025, the company had cash and equivalents of $10.4 million and $48.5 million available on its revolving credit facility [6][9] - The net debt to trailing twelve-month EBITDA ratio improved to 0.5x from 1.7x a year earlier [6][9] Dividend and Shareholder Returns - Escalade declared a quarterly dividend of $0.15 per share, payable on October 13, 2025 [7][9] - The company repurchased approximately $0.8 million of shares during the second quarter [10] Management Commentary - The CEO highlighted the company's focus on operational efficiency and cost structure improvements, despite challenges in consumer demand and unfavorable weather impacting outdoor product sales [8][10] - The management is committed to enhancing supply chain efficiency and implementing targeted price increases to mitigate tariff impacts [10]

Company Overview - Escalade, Inc. is a leading manufacturer and distributor of sporting goods and indoor/outdoor recreation equipment, founded in 1922 and headquartered in Evansville, Indiana [3] - The company offers a diverse range of products under well-known brands such as Goalrilla™, STIGA®, Bear® Archery, Brunswick Billiards®, Accudart®, ONIX®, Lifeline®, and RAVE Sports® [3] - Escalade's mission is to connect family and friends, create lasting memories, and promote an active lifestyle [3] Financial Announcement - Escalade, Inc. will release its second quarter 2025 financial results before the market opens on August 1, 2025 [1] - A conference call to discuss the financial results will take place on the same day at 11:00 a.m. ET [1] - The conference call will include a question-and-answer session for investors [1] Investor Relations - A webcast of the conference call will be available on Escalade's Investor Relations website [2] - Contact information for investor relations is provided, including Patrick Griffin, Vice President - Corporate Development & Investor Relations [4]

Core Viewpoint - Escalade, Incorporated (NASDAQ: ESCA) has reported its Q1 financial results, indicating effective management strategies and a positive outlook for the company [1]. Financial Performance - The company has demonstrated strong performance in Q1, with management successfully mitigating challenges [1]. Investment Strategy - The company is positioned for long-term growth, appealing to investors with a 5-10 year horizon, focusing on a balanced portfolio of growth, value, and dividend-paying stocks [1].

Financial Data and Key Metrics Changes - For Q1 2025, the company reported net income of $2.6 million or $0.19 per diluted share on net sales of $55.5 million, with gross margins increasing to 26.7% from 25% in the prior year period, reflecting a 161 basis point improvement driven by lower operational costs [19][20] - Selling, general, and administrative expenses decreased by 1.2% or $100,000 compared to the prior year, totaling $10.6 million, while earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by $500,000 to $4.9 million [19][20] - Total cash provided by operations for Q1 2025 was $3.8 million, a significant increase from $7,000 in the prior year period [20] Business Line Data and Key Metrics Changes - Despite a 3% year-over-year decline in net sales, the company experienced growth in key categories such as archery, safety, darting, and outdoor games, which outperformed the prior year [6][7] - Inventory levels rose modestly as the company built stock ahead of the spring selling season for archery, basketball, and playground categories [7] Market Data and Key Metrics Changes - The company noted ongoing softness in discretionary spending and declining consumer sentiment, yet maintained a diversified portfolio that resonated with consumers [6][11] - The company is actively analyzing and planning for expanded sourcing scenarios due to trade uncertainties, particularly concerning China [12][30] Company Strategy and Development Direction - The company is focused on operational discipline, innovation, and customer centricity, with a strategy that includes optimizing supply chains and expanding domestic manufacturing capacity [10][11] - The company is investing in direct-to-consumer and e-commerce initiatives to deepen consumer engagement and build loyalty [14][17] - The company remains open to strategic acquisitions that enhance its brand portfolio and expand addressable markets, maintaining financial discipline in its approach [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by a dynamic macroeconomic and geopolitical landscape but expressed confidence in the company's ability to navigate uncertainties through a diversified portfolio and strong margin structure [11][30] - The company is taking proactive steps to mitigate tariff impacts and is evaluating various scenarios to adapt to changing market conditions [12][31] Other Important Information - The company reduced bank debt by $1.8 million during the quarter and returned capital to shareholders through dividends and share repurchases [8] - The company completed remediation of material weaknesses in its internal financial reporting controls, which were initially disclosed in March 2024 [20][21] Q&A Session Summary Question: Follow-up on proactive steps to address the tariff situation - Management recognized high uncertainty in the marketplace but emphasized their diversified portfolio and agile supply position to navigate challenges [27][30] Question: Quantification of tariff impact in Q1 - The company indicated a little over 100 basis points negative impact from tariffs in Q1, despite achieving a 161 basis point improvement in gross margins [33] Question: Inventory levels and their implications - Management confirmed that inventory levels were strategically reduced, and existing inventory is valuable as it does not incur tariffs, contributing to lower costs [34][35]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported net income of $2.6 million or $0.19 per diluted share on net sales of $55.5 million, with gross margins increasing to 26.7% from 25% in the prior year period, reflecting a 161 basis point improvement due to lower operational costs [17][18] - Selling, general and administrative expenses decreased by 1.2% or $100,000 to $10.6 million compared to the prior year [17] - Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by $500,000 to $4.9 million in Q1 2025 [17] Business Line Data and Key Metrics Changes - Net sales declined approximately 3% year over year, but gross margins expanded by more than 160 basis points, driven by lower manufacturing and logistics costs [5][17] - The company saw growth in key categories such as archery, safety, darting, and outdoor games, which outperformed the prior year period despite overall softness in discretionary spending [5] Market Data and Key Metrics Changes - Inventory levels rose modestly during the quarter as the company built inventory ahead of the spring selling season for archery, basketball, and playground categories [6] - The company maintained a strong focus on working capital efficiency, generating nearly $4 million in operating cash flow [6] Company Strategy and Development Direction - The company is focused on operational discipline, innovation, and customer centricity, with a strategy to strengthen direct-to-consumer and e-commerce presence [9][13] - Plans include expanding domestic manufacturing capacity and diversifying global sourcing to mitigate tariff impacts and enhance supply chain resilience [11][12][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing softness in consumer sentiment and discretionary spending but expressed confidence in the company's diversified portfolio and operational improvements [10][12] - The company is actively analyzing and planning for various sourcing scenarios in response to trade uncertainties, particularly regarding China [11][30] Other Important Information - The company reduced bank debt by $1.8 million and paid a quarterly dividend of $2.1 million during the quarter [7] - Total debt outstanding as of March 31, 2025, was $23.8 million, with a net leverage ratio of 0.8 times trailing twelve months EBITDA [18] Q&A Session Summary Question: Follow-up on proactive steps to address the tariff situation - Management highlighted the importance of a diversified category portfolio and agile supply position to navigate uncertainties, mentioning ongoing optimization of the supply chain and potential pricing actions [25][30] Question: Quantification of tariff impact in Q1 - Management indicated that there was a little over 100 basis points negative impact from tariffs in Q1, but still achieved a 161 basis point improvement in gross margins [32] Question: Inventory levels and their implications - Management explained that inventory levels were strategically reduced over the past few years, resulting in a more right-sized inventory that contributed to lower costs [33]

Financial Performance - Net sales for the three months ended March 31, 2025, were $55,479 thousand, a decrease of 3.2% compared to $57,304 thousand for the same period in 2024[11] - Operating income increased to $3,652 thousand for the three months ended March 31, 2025, up 19.3% from $3,060 thousand in the prior year[11] - Net income for the three months ended March 31, 2025, was $2,619 thousand, representing a 47.4% increase from $1,775 thousand in the same period of 2024[11] - Basic and diluted earnings per share for the three months ended March 31, 2025, were both $0.19, compared to $0.13 for the same period in 2024, reflecting a 46.2% increase[11] - Total gross sales for the three months ended March 31, 2025, were $61,508 thousand, down from $64,047 thousand in the same period in 2024, a decline of 3.9%[38] Cash and Assets - Cash and cash equivalents at the end of the period were $2,214 thousand, a significant increase from $283 thousand at the end of March 31, 2024[15] - Total assets as of March 31, 2025, were $222,074 thousand, compared to $256,347 thousand as of March 31, 2024, indicating a decrease of 13.4%[26] Costs and Expenses - The cost of products sold for the three months ended March 31, 2025, was $40,689 thousand, down 5.3% from $42,950 thousand in the same period of 2024[11] - Depreciation and amortization expenses for the three months ended March 31, 2025, were $1,239 thousand, compared to $1,373 thousand for the same period in 2024[15] - The company recognized stock-based compensation expense of $467 thousand for the three months ended March 31, 2025, compared to $429 thousand in the prior year[23] - Operating lease costs for the three months ended March 31, 2025, were $133 thousand, compared to $375 thousand for the same period in 2024, indicating a reduction of approximately 64.5%[42] Dividends - The company declared dividends of $0.15 per share for both the January and April 2025 payments, totaling approximately $2.1 million each time[27] - The company declared dividends of approximately $2.1 million for each of the quarters ended January 13, 2025, and April 14, 2025, maintaining a consistent dividend of $0.15 per common share[27] Liabilities and Loans - The Company had an outstanding principal amount of the term loan of $23.8 million as of March 31, 2025, with no amount drawn under the Revolving Facility[46] - The accrued liability amount attributable to warranties was $608 thousand as of March 31, 2025, with no changes to the accrual due to a change in estimate during the current period[35] - Contract liabilities related to returns and customer allowances were $5,629 thousand as of March 31, 2025, compared to $6,708 thousand as of December 31, 2024[37] - Total future minimum lease payments under non-cancellable leases as of March 31, 2025, were $1,113 thousand[43] Taxation - The effective tax rate for the three months ending March 31, 2025, was 23.8%, consistent with the same period last year[47] Shareholder Information - The weighted average common shares outstanding for the three months ended March 31, 2025, were 13,716 thousand, slightly down from 13,786 thousand for the same period in 2024[28] - The Company has a new minimum interest coverage ratio covenant of 3.50 to 1.00 effective September 30, 2024, replacing the previous fixed charge coverage ratio covenant[45]

Financial Performance - Escalade reported net sales of $55.5 million for Q1 2025, a decrease of 3.2% compared to $57.3 million in Q1 2024[3][8] - Net income for Q1 2025 was $2.6 million, or $0.19 diluted earnings per share, representing an increase of 46.2% from $1.8 million, or $0.13 diluted earnings per share in Q1 2024[4][8] - EBITDA increased to $4.9 million in Q1 2025, up 11.0% from $4.4 million in the prior-year period[5][8] - Net income for Q1 2025 increased to $2,619,000, up 47.5% from $1,775,000 in Q1 2024[22] - EBITDA for Q1 2025 was $4,922,000, an increase of 10.9% compared to $4,436,000 in Q1 2024[24] Cash Flow and Assets - Cash flow from operations was $3.8 million, a significant increase of $3.8 million compared to the same quarter last year[6] - Cash and cash equivalents at the end of Q1 2025 were $2,214,000, down from $4,194,000 at the end of Q4 2024, representing a decrease of 47.3%[22] - Net cash provided by operating activities for Q1 2025 was $3,791,000, significantly higher than $7,000 in Q1 2024[22] - Total current assets decreased to $131,108,000 in Q1 2025 from $133,824,000 in Q4 2024, a decline of 2.0%[20] Debt and Equity - Total debt decreased to $23.8 million at the end of Q1 2025, down from $53.5 million at the end of Q1 2024[6] - Long-term debt decreased to $16,667,000 in Q1 2025 from $18,452,000 in Q4 2024, a decrease of 9.6%[20] - Total liabilities decreased to $53,309,000 in Q1 2025 from $57,333,000 in Q4 2024, a reduction of 7.0%[20] - Total stockholders' equity remained relatively stable at $168,765,000 in Q1 2025 compared to $168,997,000 in Q4 2024[20] Dividends and Shareholder Returns - Escalade announced a quarterly dividend of $0.15 per share, payable on July 14, 2025[7] - The company paid cash dividends of $2,061,000 in Q1 2025, slightly down from $2,063,000 in Q1 2024[22] Operational Insights - Gross margin improved to 26.7%, an increase of 161 basis points year-over-year, driven by lower fixed costs and reduced inventory handling costs[4][9] - The company experienced increased demand in archery and safety products, partially offsetting declines in basketball and table tennis[3][9] - Escalade is focused on product innovation and capital allocation to enhance long-term shareholder value[9] - The company is evaluating options to mitigate the impact of new tariffs and potential supply chain disruptions[9] Other Financial Metrics - The company reported a loss on disposal of assets amounting to $3,000 in Q1 2025, compared to $67,000 in Q1 2024[22]