esca20250930

esca20250930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2025 or

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____ to _____

Commission File Number 0-6966

ESCALADE, INCORPORATED

(Exact name of registrant as specified in its charter)

Indiana

(State or Other Jurisdiction of Incorporation or Organization)

13-2739290

(I.R.S. Employer Identification No.)

817 Maxwell Ave, Evansville, Indiana

(Address of principal Executive Office)

47711

(Zip Code)

812-467-1358

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, No Par Value	ESCA	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at October 27, 2025
Common, no par value	13,803,745

INDEX

		Page No.
Part I.	Financial Information:

Item 1 -	Financial Statements:

	Consolidated Condensed Balance Sheets as of September 30, 2025, December 31, 2024, and September 30, 2024	3

	Consolidated Condensed Statements of Operations for the Three Months and Nine Months Ended September 30, 2025 and September 30, 2024	4

	Consolidated Condensed Statements of Stockholders’ Equity for the Three Months and Nine Months Ended September 30, 2025 and September 30, 2024	5

	Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2025 and September 30, 2024	6

	Notes to Consolidated Condensed Financial Statements	7

Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	18

Item 4 -	Controls and Procedures	18

Part II.	Other Information

Item 1 -	Legal Proceedings	18


Item 1A -	Risk Factors	18

Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 6 -	Exhibits	20

	Signature	20

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

All Amounts in Thousands Except Share Information	September 30, 2025		December 31, 2024		September 30, 2024
	(Unaudited)		(Audited)		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	3,509	$	4,194	$	426
Receivables, less allowance of $957; $694; and $669; respectively		52,756		48,768		53,480
Inventories		80,662		76,025		85,485
Prepaid expenses		4,350		4,372		5,117
Prepaid income tax		-		465		156
TOTAL CURRENT ASSETS		141,277		133,824		144,664

Property, plant and equipment, net		21,716		22,221		22,856
Operating lease right-of-use assets		1,347		1,186		7,640
Intangible assets, net		25,636		25,838		26,409
Goodwill		42,326		42,326		42,326
Other assets		158		935		1,035
TOTAL ASSETS	$	232,460	$	226,330	$	244,930

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt	$	7,143	$	7,143	$	7,143
Trade accounts payable		21,119		11,858		19,965
Accrued liabilities		12,923		15,050		13,769
Income tax payable		1,169		-		-
Current operating lease liabilities		496		444		1,083
TOTAL CURRENT LIABILITIES		42,850		34,495		41,960

Other Liabilities:
Long‑term debt		13,095		18,452		22,353
Deferred income tax liability		3,302		3,302		3,125
Operating lease liabilities		886		787		7,125
Other liabilities		-		297		297
TOTAL LIABILITIES		60,133		57,333		74,860

Stockholders' Equity:
Preferred stock:
Authorized 1,000,000 shares; no par value, none issued		-		-		-
Common stock:
Authorized 30,000,000 shares; no par value, issued and outstanding – 13,803,745; 13,732,719; and 13,877,302; shares respectively		3,757		4,218		5,909
Retained earnings		168,570		164,779		164,161
TOTAL STOCKHOLDERS' EQUITY		172,327		168,997		170,070
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	232,460	$	226,330	$	244,930

See notes to Consolidated Condensed Financial Statements.

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended						Nine Months Ended
All Amounts in Thousands Except Per Share Data	September 30, 2025			September 30, 2024			September 30, 2025			September 30, 2024

Net sales	$	67,786		$	67,738		$	177,598		$	187,568

Costs and Expenses
Cost of products sold		48,720			50,947			130,305			141,312
Selling, administrative and general expenses		11,198			11,675			32,018			32,439
Amortization		567			1,047			1,701			2,231
Gain on sale of assets held for sale		-			(3,905	)		-			(3,905	)

Operating Income		7,301			7,974			13,574			15,491

Other Income (Expense)
Interest expense		(204	)		(530	)		(661	)		(1,995	)
Other income		21			7			103			13

Income Before Income Taxes		7,118			7,451			13,016			13,509

Provision for Income Taxes		1,564			1,784			3,018			3,223

Net Income	$	5,554		$	5,667		$	9,998		$	10,286

Earnings Per Share Data:
Basic earnings per share	$	0.40		$	0.41		$	0.73		$	0.74
Diluted earnings per share	$	0.40		$	0.40		$	0.72		$	0.73

Dividends declared	$	0.15		$	0.15		$	0.45		$	0.45

See notes to Consolidated Condensed Financial Statements.

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

	Common Stock				Retained
All Amounts in Thousands	Shares		Amount		Earnings			Total

Balances at June 30, 2024		13,877	$	5,406	$	160,576		$	165,982

Net income		-		-		5,667			5,667
Expense of restricted stock units		-		503		-			503
Dividends declared		-		-		(2,082	)		(2,082	)

Balances at September 30, 2024		13,877	$	5,909	$	164,161		$	170,070


Balances at December 31, 2023		13,737	$	4,480	$	160,099		$	164,579

Net income		-		-		10,286			10,286
Expense of restricted stock units		-		1,429		-			1,429
Settlement of restricted stock units		140		-		-			-
Dividends declared		-		-		(6,224	)		(6,224	)

Balances at September 30, 2024		13,877	$	5,909	$	164,161		$	170,070

	Common Stock						Retained
All Amounts in Thousands	Shares			Amount			Earnings			Total

Balances at June 30, 2025		13,804		$	3,251		$	165,087		$	168,338

Net income		-			-			5,554			5,554
Expense of restricted stock units		-			506			-			506
Dividends declared		-			-			(2,071	)		(2,071	)

Balances at September 30, 2025		13,804		$	3,757		$	168,570		$	172,327


Balances at December 31, 2024		13,733		$	4,218		$	164,779		$	168,997

Net income		-			-			9,998			9,998
Expense of restricted stock units		-			1,468			-			1,468
Settlement of restricted stock units		165			-			-			-
Issuance of restricted stock awards		35			-			-			-
Dividends declared		-			-			(6,207	)		(6,207	)
Purchase of stock		(145	)		(2,171	)		-			(2,171	)
Issuance of common stock for service		16			242			-			242

Balances at September 30, 2025		13,804		$	3,757		$	168,570		$	172,327

See notes to Consolidated Condensed Financial Statements.

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended
All Amounts in Thousands	September 30, 2025			September 30, 2024

Operating Activities:
Net income	$	9,998		$	10,286
Depreciation and amortization		3,767			4,691
Allowance for credit losses		630			574
Stock-based compensation		1,468			1,429
Loss (gain) on disposal of assets		7			(3,852	)
Common stock issued in lieu of bonus to officers		124			-
Director stock compensation		118			-
Changes in assets and liabilities		6			10,631
Net cash provided by operating activities		16,118			23,759

Investing Activities:
Purchase of property and equipment		(1,267	)		(1,482	)
Acquisition		(1,800	)		-
Proceeds from sale of property and equipment		-			5,757
Net cash (used in) provided by investing activities		(3,067	)		4,275

Financing Activities:
Proceeds from issuance of long-term debt		25,061			86,651
Payments on long-term debt		(30,419	)		(108,051	)
Cash dividends paid		(6,207	)		(6,224	)
Purchase of stock		(2,171	)		-
Net cash used in financing activities		(13,736	)		(27,624	)
Net (decrease) increase in cash and cash equivalents		(685	)		410
Cash and cash equivalents, beginning of period		4,194			16
Cash and cash equivalents, end of period	$	3,509		$	426

Supplemental Cash Flows Information
Interest paid	$	627		$	1,893
Income taxes paid, net	$	1,682		$	3,380

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

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.

Goodwill – We perform our annual goodwill impairment analysis in the fourth quarter of each fiscal year, or more often if events or changes in circumstances indicate the carrying value of goodwill may not be recoverable, in accordance with guidance in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 350, “Intangibles – Goodwill and Other” (“ASC 350”). During the three months ended September 30, 2025, we identified a potential indicator of impairment due to the increase in tariff-related costs which led to the conclusion that a triggering event had occurred and therefore we performed a quantitative test for the single reporting unit.

We measure the fair value of our reporting unit based on a guideline company method and discounted cash flow method using a discount rate determined by Management to be commensurate with the risk inherent in our reporting unit’s current business model. The fair market value was determined by weighting the two methods equally. Our estimates of discounted cash flows, selected multiples and market value of invested capital to derive the fair value were measured in accordance with ASC 350. Inputs to determine the fair value are considered to be level 3 inputs. We are using estimates of discounted cash flows that may change, and if they change negatively it could result in the need to write down those assets to fair value. Based on our interim impairment test of goodwill as of September 1, 2025, it was determined that the fair value of the reporting unit was in excess of the carrying value.

Although there was no impairment of goodwill, we noted that the fair value of the reporting unit exceeded its carrying value by approximately 6%. If there is a continued increase in costs or other adverse events that could negatively impact the future cash flows of our business and its fair value, goodwill may be at risk of impairment in future periods.

Note B ‑ Seasonal Aspects

The results of operations for the three and nine months ended September 30, 2025 and September 30, 2024 are not necessarily indicative of the results to be expected for the full year.

Note C ‑ Inventories

In thousands	September 30, 2025		December 31, 2024		September 30, 2024

Raw materials	$	3,700	$	2,721	$	3,663
Work in progress		3,447		2,370		2,948
Finished goods		73,515		70,934		78,874
	$	80,662	$	76,025	$	85,485

Note D – Fair Values of Financial Instruments

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

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

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

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 September 30, 2025, December 31, 2024 and September 30, 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:

	September 30, 2025				December 31, 2024				September 30, 2024
In thousands	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value

Term Loan Facility	$	20,238	$	19,231	$	25,595	$	23,528	$	27,381	$	25,275

Note E – Stock Compensation

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

During the nine months ended September 30, 2025, the Company awarded 18,000 restricted stock units to directors, 105,181 restricted stock units and 35,000 shares of restricted stock to employees. The restricted stock units awarded to directors time vest over two years (one-half one year from grant date and one-half two years from grant date) provided that the director is still a director of the Company at the vest date. Director restricted stock units are subject to forfeiture, except for termination of services as a result of retirement, death or disability, if on the vesting date the director no longer holds a position with the Company. All of 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. The 35,000 shares of restricted stock vest on the fifth anniversary from the grant date provided that the employee is still employed by the Company on the vesting date.

For the three and nine months ended September 30, 2025, the Company recognized stock based compensation expense of $506 thousand and $1,468 thousand, respectively compared to stock based compensation expense of $503 thousand and $1,429 thousand for the same periods in the prior year.

At September 30, 2025 and September 30, 2024, there was $2.3 million and $1.8 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 September 30, 2025 is expected to be recognized over the weighted average period of 2.1 years.

Note F ‑ Segment Information

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 September 30, 2025
In thousands	Sporting Goods			Corp.			Total

Revenues from external customers	$	67,786		$	-		$	67,786
Cost of product sold		48,720			-			48,720
Other operating expenses		11,224			541			11,765
Operating income (loss)		7,842			(541	)		7,301
Interest expense		(204	)		-			(204	)
Other income		21			-			21
Provision (benefit) for Income Taxes		2,103			(539	)		1,564
Net income (loss)		5,556			(2	)		5,554

Depreciation and Amortization	$	1,266			-		$	1,266
Total assets	$	226,362		$	6,098		$	232,460

	As of and for the Nine Months Ended September 30, 2025
In thousands	Sporting Goods			Corp.			Total

Revenues from external customers	$	177,598		$	-		$	177,598
Cost of product sold		130,305			-			130,305
Other operating expenses		31,743			1,976			33,719
Operating income (loss)		15,550			(1,976	)		13,574
Interest expense		(661	)		-			(661	)
Other income		103			-			103
Provision (benefit) for Income Taxes		4,119			(1,101	)		3,018
Net income (loss)		10,873			(875	)		9,998

Depreciation and Amortization	$	3,767			-		$	3,767
Total assets	$	226,362		$	6,098		$	232,460

	As of and for the Three Months Ended September 30, 2024
In thousands	Sporting Goods			Corp.			Total

Revenues from external customers	$	67,738		$	-		$	67,738
Cost of product sold		50,947			-			50,947
Other operating expenses		8,035			782			8,817
Operating income (loss)		8,756			(782	)		7,974
Interest expense		(530	)		-			(530	)
Other income		7			-			7
Provision (benefit) for Income Taxes		2,263			(479	)		1,784
Net income (loss)		5,970			(303	)		5,667

Depreciation and Amortization	$	1,940			-		$	1,940
Total assets	$	241,347		$	3,583		$	244,930

	As of and for the Nine Months Ended September 30, 2024
In thousands	Sporting Goods			Corp.			Total

Revenues from external customers	$	187,568		$	-		$	187,568
Cost of product sold		141,312			-			141,312
Other operating expenses		28,294			2,471			30,765
Operating income (loss)		17,962			(2,471	)		15,491
Interest expense		(1,995	)		-			(1,995	)
Other income		13			-			13
Provision (benefit) for Income Taxes		4,392			(1,169	)		3,223
Net income (loss)		11,588			(1,302	)		10,286

Depreciation and Amortization	$	4,691			-		$	4,691
Total assets	$	241,347		$	3,583		$	244,930

Note G – Dividend Payment

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.

On July 14, 2025, the Company paid a quarterly dividend of $0.15 per common share to all shareholders of record on July 7, 2025. The total amount of the dividend was approximately $2.1 million and was charged against retained earnings.

On October 13, 2025, the Company paid a quarterly dividend of $0.15 per common share to all shareholders of record on October 6, 2025. The total amount of the dividend was approximately $2.1 million and was charged against retained earnings.

Note H ‑ Earnings Per Share

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

	Three Months Ended				Nine Months Ended
In thousands	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024

Weighted average common shares outstanding		13,769		13,877		13,751		13,845
Dilutive effect of restricted stock units		102		156		121		162
Weighted average common shares outstanding, assuming dilution		13,871		14,033		13,872		14,007

Note I – New Accounting Standards and Changes in Accounting Principles

With the exception of that discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended September 30, 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

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.

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 $610 thousand as of September 30, 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 $6,179 thousand, $6,708 thousand and $5,325 thousand as of September 30, 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				Nine Months Ended
All Amounts in Thousands	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024

Gross Sales by Channel:
Mass Merchants	$	31,212	$	32,725	$	68,722	$	72,877
Specialty Dealers		17,799		17,238		56,010		59,511
E-commerce		22,493		22,122		61,257		65,927
International		3,190		3,355		9,680		9,879
Other		601		881		2,247		2,683
Total Gross Sales		75,295		76,321		197,916		210,877

Less: Gross-to-Net Sales Adjustments
Returns		2,002		2,650		5,089		6,451
Warranties		252		336		784		1,191
Customer Allowances		5,255		5,597		14,445		15,667
Total Gross-to-Net Sales Adjustments		7,509		8,583		20,318		23,309
Total Net Sales	$	67,786	$	67,738	$	177,598	$	187,568

Note K – Leases

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 September 30, 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.

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 are as follows:

	Three Months Ended				Nine Months Ended
All Amounts in Thousands	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024

Lease Expense
Operating Lease Cost	$	154	$	374	$	440	$	1,125
Short-term Lease Cost		240		249		782		988
Variable Lease Cost		42		110		142		418
Total Operating Lease Cost	$	436	$	733	$	1,364	$	2,531

Operating Lease – Operating Cash Flows	$	158	$	267	$	449	$	782
New ROU Assets – Operating Leases	$	48	$	-	$	535	$	52

Other information about lease amounts recognized in our consolidated condensed financial statements is summarized as follows:

	Nine Months Ended
All Amounts in Thousands	September 30, 2025			September 30, 2024

Weighted Average Remaining Lease Term – Operating Leases (in years)		3.08			7.47
Weighted Average Discount Rate – Operating Leases		6.68	%		5.18	%

Future minimum lease payments under non-cancellable leases as of September 30, 2025 were as follows:

All Amounts in Thousands

Remainder of Year 1	$	145
Year 2		569

SEC Form 10-Q filed by Escalade Incorporated