ESCALADE INC

Previous wording

The United States Government has 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. While the United States Supreme Court issued a ruling earlier this year striking down tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”), the U.S. government has since initiated new tariffs under Section 122 of the Trace Act. Although the Company has recognized and received recoveries of certain IEEPA tariffs and may recover additional IEEPA claims as well, the Company still faces challenges from these newly imposed tariffs and uncertainties regarding international trade policy and practices including retaliatory tariffs and trade restrictions.

Current wording

The United States Government has 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. While the United States Supreme Court issued a ruling earlier this year striking down tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”), the U.S. government has since initiated new tariffs under various sections of the Trade Act. Although the Company has recognized and received recoveries of certain IEEPA tariffs and may recover additional IEEPA claims as well, the Company still faces challenges from these newly imposed tariffs and uncertainties regarding international trade policy and practices including retaliatory tariffs and trade restrictions.

Previous wording

Additionally, hostilities in the Middle East have adversely affected shipping routes and oil prices and may have effects on the economy in general. Tariffs, restrictions on trade, rising energy costs and disrupted shipping routes have in the past and may again in the future 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.

Current wording

Additionally, hostilities in the Middle East have adversely affected shipping routes and oil prices. Tariffs, restrictions on trade, rising energy costs and disrupted shipping routes have in the past and may again in the future 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.

Previous wording

Sales increased 6.2% for the second quarter of 2026, compared with the same period in the prior year. Sales increased largely due to increases in our archery categories, including the incremental contribution from our September 2025 acquisition of Gold Tip assets. Net sales also benefited from increased demand in the safety, table tennis and basketball categories. These increases were partially offset by lower sales in outdoor game categories.

Current wording

Sales decreased 3.2% for the third quarter of 2026, compared with the same period in the prior year. Sales decreased primarily due to lower sales in our basketball, indoor games and table tennis categories against a prior year period that reflected tariff-related order timing. These decreases were partially offset by increases in our archery category, including strong vertical bow demand and the incremental contribution from our September 2025 acquisition of Gold Tip assets, as well as increased demand in the safety and outdoor games categories.

Previous wording

For the six months ended June 30, 2026, net sales increased 3.3% 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, 2026, net sales increased 0.8% compared with the same period in the prior year.

Previous wording

Gross margin increased 146 basis points to 26.2% for the second quarter of 2026 compared to 24.7% for the same period in 2025, primarily driven by better absorption, operating leverage and a favorable sales mix. For the six months ended June 30, 2026, gross margin increased to 28.4% compared to 25.7% for the same period in 2025.

Current wording

Gross margin increased 123 basis points to 29.4% for the third quarter of 2026 compared to 28.1% for the same period in 2025, primarily driven by better absorption and a favorable customer and sales mix. For the nine months ended September 30, 2026, gross margin increased to 28.8% compared to 26.6% for the same period in 2025.

Previous wording

Selling, general and administrative expenses (SG&A) were $12.5 million for the second quarter of 2026 compared to $10.2 million for the same period in the prior year, an increase of $2.2 million or 21.7%. The increase in SG&A is largely driven by selling and marketing expenses related to recent acquisitions and an increase in variable compensation.

Current wording

Selling, general and administrative expenses (SG&A) were $11.6 million for the third quarter of 2026 compared to $11.2 million for the same period in the prior year, an increase of $0.4 million or 3.6%. The increase in SG&A is largely driven by selling and marketing expenses related to recent acquisitions, acquisition-related professional fees and an increase in advertising expenses.

Previous wording

SG&A as a percent of sales is 21.6% for the second quarter of 2026 compared with 18.9% for the same period in the prior year.

Current wording

SG&A as a percent of sales is 17.7% for the third quarter of 2026 compared with 16.5% for the same period in the prior year.

Previous wording

For the six months ended June 30, 2026, SG&A were $23.2 million compared to $20.8 million for the same period in the prior year.

Current wording

For the nine months ended September 30, 2026, SG&A were $34.8 million compared to $32.0 million for the same period in the prior year.

Previous wording

During the three months ended June 30, 2026, the Company recognized $10.2 million of tariff recoveries related to the U.S. Court of International Trade ruling stating importers who paid IEEPA tariffs were entitled to refunds plus interest. The Company recognized approximately $9.9 million in operating income and $0.3 million of interest income related to the IEEPA recoveries.

Current wording

During the three months ended September 30, 2026, the Company recognized $1.7 million of tariff recoveries related to the U.S. Court of International Trade ruling stating importers who paid IEEPA tariffs were entitled to refunds plus interest. The Company recognized approximately $1.6 million in operating income and $0.1 million of interest income related to the IEEPA recoveries. During the nine months ended September 30, 2026, the Company recognized $11.9 million of tariff recoveries. Approximately $11.5 million was recognized in operating income and $0.4 million was recognized in interest income.

Previous wording

The effective tax rate for the three months ending June 30, 2026 was 22.7% compared to 25.8% for the same three month period last year. The effective tax rate for the first six months ending June 30, 2026 was 23.0% compared to 24.7% for the same period last year. The effective tax rate for the three and six months ending June 30, 2026 decreased primarily due to refinements to expected state apportionment factors, which reduced state income tax expense.

Current wording

The effective tax rate for the three months ending September 30, 2026 was 22.7% compared to 22.0% for the same three month period last year. The effective tax rate for the first nine months ending September 30, 2026 was 22.9% compared to 23.2% for the same period last year.

Previous wording

Total debt as of June 30, 2026 was $14.9 million, a decrease of $3.6 million from December 31, 2025. The following schedule summarizes the Company’s total debt:

Current wording

Total debt as of September 30, 2026 was $13.1 million, a decrease of $5.4 million from December 31, 2025. The following schedule summarizes the Company’s total debt:

Previous wording

As a percentage of stockholders’ equity, total debt was 8.1%, 10.7% and 13.1% at June 30, 2026, December 31, 2025, and June 30, 2025 respectively.

Current wording

As a percentage of stockholders’ equity, total debt was 7.0%, 10.7% and 11.7% at September 30, 2026, December 31, 2025, and September 30, 2025 respectively.

Previous wording

As of June 30, 2026, the outstanding principal amount of the term loan was $14.9 million and total amount drawn under the revolving facility was zero. The term loan and revolving facility have a maturity date of January 21, 2027.

Current wording

As of September 30, 2026, the outstanding principal amount of the term loan was $13.1 million and total amount drawn under the revolving facility was zero. The term loan and revolving facility have a maturity date of January 21, 2027.

Previous wording

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 2026 and Q1 2027 operations will be sufficient to pay the remaining term loan balance of $11.3 million due on January 21, 2027.

Current wording

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 2026 and Q1 2027 operations will be sufficient to pay the remaining term loan balance due on January 21, 2027.