ESCALADE INC

Previous wording

The United States Government has continued making new announcements concerning tariffs enacted and/or proposed to be enacted on the importation of goods into the United States as well as negotiations of trade agreements to potentially replace such tariffs. Although the United States has begun to negotiate reciprocal trade agreements with several nations, few agreements have been finalized to date and the administration has 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. While the United States and China have announced agreements on certain trade frameworks and have backed off of previously announced retaliatory tariffs and other restrictive measures, the details of these agreements have not been fully disclosed and concerns over a potential trade war have persisted. Although the Company has engaged in actions to mitigate the potential impacts from tariffs and other economic pressures such as inflation and supply chain disruptions, it may not be able to effectively protect itself from these risks. 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 June 30, 2025 are not necessarily indicative of the results to be expected for fiscal year 2025.

Current wording

The United States Government has continued making new announcements concerning tariffs enacted and/or proposed to be enacted on the importation of goods into the United States as well as negotiations of trade agreements to potentially replace such tariffs. Although the United States has begun to negotiate reciprocal trade agreements with several nations, few agreements have been finalized to date and the administration has 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. However, recent announcements from China and the US have reignited concerns over a potential trade war. Although the Company has engaged in actions to mitigate the potential impacts from tariffs and other economic pressures such as inflation and supply chain disruptions, it may not be able to effectively protect itself from these risks. 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 September 30, 2025 are not necessarily indicative of the results to be expected for fiscal year 2025.

Previous wording

For the six months ended June 30, 2025, net sales decreased 8.4% compared with the same period in the prior year, driven by the same factors that impacted the second quarter.

Current wording

For the nine months ended September 30, 2025, net sales decreased 5.3% compared with the same period in the prior year, driven by the same factors that impacted the third quarter.

Previous wording

Gross margin increased 56 basis points to 24.7% for the second quarter of 2025 compared to 24.2% for the same period in 2024 primarily driven by lower fixed costs and decreased inventory storage and handling costs, partially offset by tariff-related costs and unfavorable product mix. For the six months ended June 30, 2025, gross margin increased to 25.7% compared to 24.6% for the same period in 2024 driven by the favorable impact of lower fixed costs, partially offset by tariff-related costs and an unfavorable product mix.

Current wording

Gross margin increased 334 basis points to 28.1% for the third quarter of 2025 compared to 24.8% for the same period in 2024 primarily driven by lower fixed costs and decreased inventory storage and handling costs, partially offset by tariff-related costs. For the nine months ended September 30, 2025, gross margin increased to 26.6% compared to 24.7% for the same period in 2024 driven by the favorable impact of lower fixed costs, partially offset by tariff-related costs and an unfavorable product mix.

Previous wording

Selling, general and administrative expenses (SG&A) were $10.2 million for the second quarter of 2025 compared to $10.1 million for the same period in the prior year, an increase of $0.1 million or 1.8%. SG&A as a percent of sales is 18.9% for the second quarter of 2025 compared with 16.1% for the same period in the prior year.

Current wording

Selling, general and administrative expenses (SG&A) were $11.2 million for the third quarter of 2025 compared to $11.7 million for the same period in the prior year, a decrease of $0.5 million or 4.1%. SG&A as a percent of sales is 16.5% for the third quarter of 2025 compared with 17.2% for the same period in the prior year.

Previous wording

The effective tax rate for the three months ending June 30, 2025 was 25.8% compared to 23.8% for the same three month period last year. The effective tax rate for the first six months ending June 30, 2025 was 24.7% compared to 23.8% for the same period last year.

Current wording

The effective tax rate for the three months ending September 30, 2025 was 22.0% compared to 23.9% for the same three month period last year. The effective tax rate for the nine months ended September 30, 2025 was 23.2% compared to 23.9% for the same period last year.

Previous wording

Total debt as of June 30, 2025 was $22.0 million, a decrease of $3.6 million from December 31, 2024. The following schedule summarizes the Company’s total debt:

Current wording

Total debt as of September 30, 2025 was $20.2 million, a decrease of $5.4 million from December 31, 2024. The following schedule summarizes the Company’s total debt:

Previous wording

As a percentage of stockholders’ equity, total debt was 13.1%, 15.1% and 26.0% at June 30, 2025, December 31, 2024, and June 30, 2024 respectively.

Current wording

As a percentage of stockholders’ equity, total debt was 11.7%, 15.1% and 17.3% at September 30, 2025, December 31, 2024, and September 30, 2024 respectively.

Previous wording

As of June 30, 2025, the outstanding principal amount of the term loan was $22.0 million and total amount drawn under the Revolving Facility was zero.

Current wording

As of September 30, 2025, the outstanding principal amount of the term loan was $20.2 million and total amount drawn under the Revolving Facility was zero.