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2022 ANNUAL REPORT VII
2022 ANNUAL REPORT IX
2022 ANNUAL REPORT UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended December 31, 2022
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 of incorporation)
817 Maxwell Ave, Evansville, Indiana
(Address of Principal Executive Office)
13-2739290
(I.R.S. EIN)
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
Common Stock, No Par Value
Trading Symbol
ESCA
Name of Exchange on which registered
The NASDAQ Stock Market LLC
Securities registered pursuant to section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act
Yes [ ] No [X]
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 [X] 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 [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
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 [ ]
Non-accelerated filer [ ]
Accelerated filer [X]
Smaller reporting company [X]
Emerging growth company [ ]
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2022 ANNUAL REPORT
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 has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. [X]
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Yes [ ] No [ X]
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to 240.10D-1(b). Yes [ ] No [ X] ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12 b-2 of the Exchange Act).
Yes [ ] No [X]
Aggregate market value of common stock held by nonaffiliates of the registrant as of July 9, 2022 based on the closing
sale price as reported on the NASDAQ Global Market: $128,651,418.
The number of shares of Registrant's common stock (no par value) outstanding as of February 17, 2023: 13,612,457.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's Proxy Statement relating to its annual meeting of stockholders scheduled to be held on
May 10, 2023 are incorporated by reference into Part III of this Report, which Proxy Statement will be filed with the
Securities and Exchange Commission within 120 days after the end of the Registrant’s fiscal year covered by this Form
10-K.
ESCALADE, INCORPORATED AND SUBSIDIARIES
Table of Contents
Part I
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
Part II
Item 5.
Market for the Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Item 7.
[RESERVED]
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Changes in and Disagreements with Accountants on Accounting
Item 9.
and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions and Director Independence
Item 14.
Principal Accounting Fees and Services
Part IV
Item 15.
Item 16. Form 10-K Summary
Exhibits and Financial Statement Schedules
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Part I
Business Development
ITEM 1—BUSINESS
General
Escalade, Incorporated (Escalade, the Company, we, us or our) operates in one business segment: Sporting
Goods (Escalade Sports). Escalade and its predecessors have more than 95 years of manufacturing and selling
experience in this industry.
Headquartered in Evansville, Indiana, Escalade Sports manufactures, imports, and distributes widely
recognized sporting goods brands in basketball goals, archery, indoor and outdoor game recreation and
fitness products through major sporting goods retailers, specialty dealers, key on-line retailers, traditional
department stores and mass merchants. Escalade is a leader in table tennis tables, residential in-ground
basketball goals and in archery bows. Some of the Company’s most recognized brands, owned or distributed,
include:
Product Category
Archery
Table Tennis
Basketball Goals
Pickleball
Play Systems
Fitness
Brand Names
Bear Archery®, Trophy Ridge®, Whisker Biscuit®, Cajun
Bowfishing™, Karnage®, Fletcher®, Rocket®, SIK®, BearX™
STIGA®, Ping-Pong®
Goalrilla™, Goalsetter®, Goaliath®, Silverback®, Hoopstar®
Onix®, DURA®, Pickleball Now®
Woodplay®, Childlife®, Jack & June®
The STEP®, Lifeline®, Kettleworx®, Natural Fitness®, PER4M®,
USW®
Safety
Game Tables (Hockey and Soccer)
US WEIGHT™
Triumph™ Sports, Atomic®, American Legend®, HJ Scott®, Air
Water Sports
Billiard Tables and Accessories
Darting
Outdoor Games
Hockey®
RAVE ®
American Heritage Billiards®, Brunswick Billiards®, Gold Crown®,
Centennial®, Cue&Case®, Lucasi®, Mizerak®, PureX®, Rage®,
Players®, Minnesota Fats®, Mosconi™
Unicorn®, Winmau®, Arachnid®, Accudart®, Nodor®
Victory Tailgate®, Triumph™ Sports , Zume Games®, ACL®
During 2022, 2021 and 2020, the Company had one customer that accounted for approximately 23%, 21%
and 23%, respectively of the Company’s revenues. During 2022, 2021 and 2020 the Company had another
customer which accounted for approximately 12%, 11% and 13%, respectively, of the Company’s revenues.
As of December 31, 2022, the Company had approximately 28% of its total accounts receivable with one
customer. As of December 25, 2021, the Company had approximately 24%, 17% and 10% of its total
accounts receivable with that same customer and two other customers, respectively.
Escalade Sports currently manufactures in the USA and Mexico and imports product from Asia, where the
Company utilizes a number of contract manufacturers.
The Company is the successor to The Williams Manufacturing Company, founded in 1922, an Ohio-based
manufacturer and retailer of women’s and children’s footwear, and to the Indian Archery and Toy Corp.,
founded in 1927, an Evansville, Indiana-based manufacturer of archery equipment, badminton sets, and
darts. In the 1960’s, Indian Archery entered the table tennis manufacturing business and changed its name
to Indian Industries, Inc. Williams Manufacturing and Indian Industries operated independently of each other
until a series of transactions in the early 1970’s. In 1972, Williams Manufacturing acquired Martin-Yale
Industries, Inc., an Illinois-based manufacturer of office and graphic arts products, and crafts and toys. In
1973, Williams Manufacturing acquired both Indian Industries and Harvard Table Tennis, Inc., a
Massachusetts-based manufacturer of table tennis accessories. The resulting enterprise, renamed as
Escalade, Incorporated, became a diversified manufacturer of sporting goods, recreational products, office
products, graphic arts products, hobby and craft items, toys, and footwear.
In the following decades, Escalade continued to diversify its product lines through acquisitions and organic
growth, including increasing its manufacturing capabilities for table tennis tables, pool tables, basketball
backboards, goals, and poles, and related accessories. In order to focus on areas of potential growth, Escalade
also has divested certain product lines and businesses over the years. Most notably, Escalade exited the
footwear and toy businesses in the 1970’s and ultimately completed its exit from the office products and
graphic arts businesses in 2014. Such divestitures have resulted in Escalade now focusing 100% on its
Sporting Goods business segment. Escalade’s Sporting Goods segment competes in a variety of product
categories including basketball goals, archery, billiards, indoor and outdoor games, recreational, fitness, and
related products.
Core components of Escalade’s business development and growth strategy have been, and continue to be,
investing in product innovation, developing strong brand names, and making strategic acquisitions.
Escalade’s strategic acquisitions include, among others, its acquisitions of: the table tennis and pool table
assets of the Ideal Toy Company in 1977 and of Harvard Sports, Inc. in 1980; the home exercise equipment
business of Marcy Fitness Products, Inc. in 1989; the high quality basketball system assets of Zue
Corporation, including the Goalrilla™ brand in 1999; the table tennis assets of Lifetime Products, Inc. in
2000; the darting assets of Accudart in 2001; the filled vinyl weight assets and manufacturing business of
U.S. Weight, Inc. in 2001; the assets of North American Archery Group, including the Bear® Archery brand
in 2003; the residential playground systems businesses of ChildLife, Inc. in 2005 and of Woodplay in 2006;
and the archery assets of Carolina Archery Products in 2006, of Trophy Ridge, LLC in 2007, and of Cajun
Archery in 2012. Escalade entered the pickleball product category through acquisitions of Pickleball Now
and Onix Sports in 2014 and 2015, expanded its billiard accessory business with the acquisition of
Cue&Case Sales, Inc. in 2014, and expanded its basketball distribution and domestic sourcing by acquiring
Goalsetter Systems, Inc. in 2015. In 2016, Escalade acquired the assets of Triumph Sports USA, a leader in
the indoor and outdoor games categories, in 2017 acquired the assets of Lifeline Fitness, Inc., a leader in the
fitness industry, in 2018 acquired Victory Tailgate, a manufacturer of premium licensed and custom
tailgating games, in 2020 acquired the billiard table, game room and recreational product lines of American
Heritage Billiards, and in 2020 also acquired the assets of RAVE Sports, providing entry into the water
recreational products category. Most recently, in January 2022, Escalade acquired the assets of the
Brunswick Billiards® business from Life Fitness, LLC, which complemented the Company’s existing
portfolio of billiards brands and other offerings in the Company’s indoor recreation market.
Certain products produced by Escalade Sports are subject to regulation by the Consumer Product Safety
Commission. The Company believes it is in material compliance with all applicable regulations.
For more information regarding Escalade’s business development and strategies for growth, please see “Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview.”
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Marketing and Product Development
The Company makes a substantial investment in product development and brand marketing to differentiate
its product line from its competition. We conduct market research and development efforts to design products
which satisfy existing and emerging consumer needs. The Company markets directly to the consumer or
end-user as well as through its retail partners in the form of advertising and other promotional allowances.
Competition
SEC Reports
Escalade is subject to competition with various manufacturers in each product line. The Company is not aware
of any other single company that is engaged in the same product lines as Escalade or that produces the same
range of products as Escalade. Nonetheless, competition exists for many Escalade products. Some competitors
are larger and have substantially greater resources than the Company. Escalade believes that its long-term
success depends on its ability to strengthen its relationship with existing customers, attract new customers, to
be a reliable source of products to timely supply customers with their needs, and to develop new products that
satisfy the quality and price requirements of sporting goods customers.
The Company’s Internet site (www.escaladeinc.com) makes available free of charge to all interested parties
the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form
8-K, and all amendments to those reports, as well as all other reports and schedules filed electronically with
the Securities and Exchange Commission (the Commission), as soon as reasonably practicable after such
material is electronically filed with or furnished to the Commission. Interested parties may also find reports,
proxy and information statements and other information on issuers that file electronically with the
Commission at the Commission's Internet site at www.sec.gov.
Licenses, Trademarks and Brand Names
ITEM 1A—RISK FACTORS
The Company has an agreement and contract with STIGA Sports AB for the exclusive right and license to
distribute and produce table tennis equipment under the brand name STIGA® for North America. The
Company also owns several registered trademarks and brand names including but not limited to Goalrilla™,
Goalsetter®, Bear Archery®, Brunswick Billiards®, Ping-Pong®, The Step®, Lifeline® and Woodplay®.
Backlog and Seasonality
Sales are based primarily on standard purchase orders and in most cases, orders are shipped within the same
month received. Unshipped orders at the end of the fiscal year (backlog) were not material and therefore are
not an indicator of future results. Due to diversity in product categories, revenues have not been seasonal and
are not expected to be so in the future.
Employees
The number of employees at December 31, 2022 and December 25, 2021 were as follows:
Sporting Goods
USA
Mexico
Asia
Total
2022
2021
473
90
30
593
546
103
27
676
Of Escalade’s 593 employees at December 31, 2022, 584 were full time employees and 9 were part time
employees. The I.U.E./C.W.A. (United Electrical Communication Workers of America, AFL-CIO) represents
hourly rated employees at the Escalade Sports’ Evansville, Indiana distribution center. There were
approximately 31 covered employees at December 31, 2022. A labor contract was negotiated and renewed in
May 2021 and expires on January 31, 2025.
Sources of Supplies
Raw materials for Escalade's various product lines consist of, but are not limited to, wood, steel, aluminum,
plastics, fiberglass and packaging. Escalade relies upon suppliers in various countries and upon various third
party Asian manufacturers for many of its products. The Company believes that these sources will continue to
provide adequate supplies as needed and that all other materials needed for the Company’s various operations
are available in adequate quantities from a variety of domestic and foreign sources. From time to time, Escalade
may experience disruptions in its supply chain due to circumstances beyond its control, such as the outbreak
of the coronavirus or other public health crises and limited availability of shipping containers and other third
party logistics, which disruptions could adversely impact Escalade currently and in the future. To alleviate
these concerns, Escalade continues to accelerate its timing for placing orders with its suppliers and continues
its efforts to develop other potential sources of products and raw materials. In recent years, Escalade has
increased its sourcing of some products and raw materials from Brazil and Vietnam. Escalade’s acquisition of
the Brunswick Billiards® business may open additional sourcing opportunities.
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OPERATIONAL RISKS TO THE COMPANY AND OUR BUSINESS
Markets are highly competitive which could limit the Company’s growth and reduce profitability.
The market for sporting goods is highly fragmented and intensely competitive. A majority of the Company’s
products are in markets that are experiencing low growth rates. Escalade competes with a variety of regional,
national and international manufacturers for customers, employees, products, services and other important
aspects of the business. The Company has historically sold a large percentage of its sporting goods products
to mass merchandisers and has increasingly attempted to expand sales to specialty retailer and dealer markets
and to on-line retailers. In addition to competition for sales into those distribution channels, vendors also
must compete in sporting goods with large format sporting goods stores, traditional sporting goods stores
and chains, warehouse clubs, discount stores and department stores. Competition from on-line retailers may
also impact sales. Some of the current and potential competitors are larger than Escalade and have
substantially greater financial resources that may be devoted to sourcing, promoting and selling their
products, and may discount prices more heavily than the Company can afford.
If the Company is unable to predict or effectively react to changes in consumer demand, it may lose
customers and sales may decline.
Success depends in part on the ability to anticipate and respond in a timely manner to changing consumer
demand and preferences regarding sporting goods. Products must appeal to a broad range of consumers
whose preferences cannot be predicted with certainty and are subject to change. The Company often makes
commitments to manufacture products months in advance of the proposed delivery to customers. If Escalade
misjudges the market for products, sales may decline significantly. The Company may have to take
significant inventory markdowns on unpopular products that are overproduced and/or miss opportunities for
other products that may rise in popularity, both of which could have a negative impact on profitability. A
major shift in consumer demand away from sporting goods products could also have a material adverse
effect on the Company’s business, results of operations and financial condition.
The Company has been experiencing higher inventory levels, which adversely impacts the Company’s
operating results.
In response to supply chain issues and other factors, the Company accelerated its product purchases to meet
expected demand. Although the Company endeavors to accurately predict changes in customer demands and
consumer spending patterns with respect to the Company’s products, demand for products can change
significantly between the time inventory is ordered and the date of sale. While the Company continues to
experience product demand in excess of historical levels, the Company’s inventories throughout 2022 were
higher than desired. In some instances, product was received after the peak sales season had occurred,
thereby further contributing to above normal inventory levels. Accordingly, increased costs associated with
inventory adversely impacted the Company’s operating results in 2022 and may continue to do so until
inventories are optimized.
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The Company may pursue strategic acquisitions, divestitures, or investments and the failure of a
strategic transaction to produce anticipated results or the inability to fully integrate an acquired
company could have an adverse impact on the Company’s business.
The Company has made acquisitions of complementary companies or businesses, which have been part of
the strategic plan, and may continue to pursue acquisitions in the future from time to time. Acquisitions may
result in difficulties in assimilating acquired companies, and may result in the diversion of capital and
management’s attention from other business issues and opportunities. The Company may not be able to
successfully integrate operations that it acquires, including personnel, financial and information systems,
cybersecurity measures, distribution, and operating procedures. If the Company fails to successfully
integrate acquisitions, the Company’s business could suffer. In addition, acquisitions may result in the
incurrence of debt, contingent liabilities, amortization expense or write-offs of goodwill or other intangibles,
any of which could affect the Company’s financial position. The Company also has sometimes divested or
discontinued certain operations, assets, and products that did not perform to the Company’s expectations or
no longer fit with the Company’s strategic objectives.
Divestitures may result in gains, losses, contingent liabilities, write-offs, tax consequences, or other related
costs and expenses that could affect the Company’s financial position. Escalade will consider acquisitions,
divestitures, and investments in the future, one or more of which, individually or in the aggregate, could be
material to the Company’s overall business, operations or financial position.
Growth may strain resources, which could adversely affect the Company’s business and financial
performance.
The Company has grown in the past through strategic acquisitions, and continues to make acquisitions in its
Sporting Goods business. Our growth strategy also depends on our ability to grow our e-commerce business,
including continued expansion and development of our own direct to consumer e-commerce distribution
channel. Growth places additional demands on management and operational systems. If the Company is not
successful in continuing to support operational and financial systems, expanding the management team and
increasing and effectively managing customers and suppliers, growth may result in operational inefficiencies
and ineffective management of the Company’s business, which could adversely affect its business and
financial performance.
The Company’s ability to operate and expand its business and to respond to changing business and
economic conditions will be dependent upon the availability of adequate capital.
The rate of expansion will also depend on the availability of adequate capital, which in turn will depend in
large part on cash flow generated by the business and the availability of equity and debt capital. The
Company can make no assurances that it will be able to obtain equity or debt capital on acceptable terms or
at all. Our current senior secured revolving credit facility contains provisions that limit our ability to incur
additional indebtedness or make substantial asset sales, which might otherwise be used to finance our
operations. In the event of our insolvency, liquidation, dissolution or reorganization, the lenders under our
senior secured revolving credit facility would be entitled to payment in full from our assets before
distributions, if any, to our stockholders.
The Company could suffer if it fails to attract and retain skilled management and key personnel.
The Company’s success depends in large part on its ability to attract and retain highly qualified management
executives and key personnel. Significant competition for qualified candidates exists in the Company’s
business lines and geographic locations. If the Company is not able to hire and retain its executives and key
personnel, or if the compensation costs required to attract and retain such individuals becomes more
expensive, the Company may suffer adverse consequences to its business, operations, and financial
condition.
The Company derives a substantial portion of its revenue from a few significant customers and loss of
any of these customers could materially affect our results of operations and financial condition.
The Company has two major customers, each of which accounted for more than ten percent of consolidated
gross sales in the Company’s 2022 fiscal year. The Company also has several other large customers, none
of which represent more than ten percent of consolidated gross sales, and historically has derived substantial
revenues from these customers. Our customers continue to experience industry consolidation, which
increases our risk that we may be unable to find sufficient alternative customers. The Company needs to
continue to expand its customer base, including sales of new product offerings to existing customers, in order
to minimize the effects of the loss of any single customer in the future. If sales to one or more of the large
customers would be lost or materially reduced, there can be no assurance that the Company will be able to
replace such revenues, which could have a material adverse effect on the Company's business, results of
operations and financial condition.
The Company’s customers may experience financial difficulties that could result in losses to the
Company.
From time to time, one or more of the Company’s customers have experienced, are experiencing, or may in
the future experience financial difficulties that impair their ability to pay all amounts owed to the Company.
In such instances, the customer may file bankruptcy or take other actions to restructure the amounts owed to
secured and unsecured creditors, including unsecured trade creditors such as the Company. When this
occurs, the Company may not be able to collect the full amount owed to it by the customer, and in severe
situations may have to write off all or a substantial portion of those customer receivables. Any significant
resulting losses incurred by the Company relating to these or other customers could have a material adverse
effect on the Company’s business, results of operation, and financial condition.
The Company’s business may be adversely affected by the actions of and risks associated with third-
party suppliers.
The raw materials that the Company purchases for manufacturing operations and many of the products that
it sells are sourced from a wide variety of third-party suppliers. The Company cannot control the supply,
design, function or cost of many of the products that are offered for sale and are dependent on the availability
and pricing of key materials and products. Disruptions in the availability of raw materials used in production
of these products may adversely affect sales and result in customer dissatisfaction. Price increases in raw
materials adversely impacted the Company’s net income in fiscal year 2022. In addition, global sourcing of
many of the products sold is an important factor in the Company’s financial performance. The ability to find
qualified suppliers and to access products in a timely and efficient manner is a significant challenge,
especially with respect to goods sourced outside the United States. Political instability, financial instability
of suppliers, merchandise quality issues, trade restrictions, tariffs, currency exchange rates, transport
capacity and costs, inflation and other factors relating to foreign trade are beyond the Company’s control.
Historically, instability in the political and economic environments of the countries in which the Company
or its suppliers obtain products and raw materials has not had a material adverse effect on operations.
However, the Company cannot predict the effect that future changes in economic or political conditions in
the United States and in such foreign countries may have on operations. In the event of disruptions or delays
in supply due to economic or political conditions, such disruptions or delays could adversely affect results
of operations unless and until alternative supply arrangements could be made. In addition, products and
materials purchased from alternative sources may be of lesser quality or more expensive than the products
and materials currently purchased abroad.
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Deterioration in relationships with suppliers or in the financial condition of suppliers could adversely
affect liquidity, results of operations and financial position.
Access to materials, parts and supplies is dependent upon close relationships with suppliers and the ability
to purchase products from the principal suppliers on competitive terms. The Company does not enter into
long-term supply contracts with these suppliers, and has no current plans to do so in the future. These
suppliers are not required to sell to the Company and are free to change the prices and other terms. Any
deterioration or change in the relationships with or in the financial condition of the Company’s significant
suppliers could have an adverse impact on its ability to procure materials and parts necessary to produce
products for sale and distribution. If the Company or any of the significant suppliers terminated or
significantly curtailed its relationship with a significant supplier or the Company, respectively, or if a
significant supplier ceased operations, the Company would be forced to expand relationships with other
suppliers, seek out new relationships with new suppliers or risk a loss in market share due to diminished
product offerings and availability. Any change in one or more of these suppliers’ willingness or ability to
continue to supply the Company with their products could have an adverse impact on the Company’s
liquidity, results of operations and financial position.
FPO
Disruptions to our supply chain could have an adverse impact on our operations.
Many of the Company’s products are manufactured outside the United States. Those products must be
transported by third parties over large geographic distances. Delays in the shipment or delivery of our
products could occur due to work stoppages, port strikes, lack of availability of transportation, and other
factors beyond the Company’s control. The Company continues to experience increased shipping costs for
products obtained from overseas due to a shortage of available shipping containers. If the Company
experiences any significant disruption in its supply chain or sharply rising costs, for any reason, such as the
coronavirus pandemic, the Company may be unable to satisfy customer demand for our products resulting
in lost sales. Such delays and increased costs could impair our ability to timely and efficiently deliver our
products, and could adversely impact our operating results.
Intellectual property rights are valuable, and any inability to protect them could reduce the value of
products.
The Company obtains patents, trademarks and copyrights for intellectual property, including its brand
names, which represent important assets to the Company. If the Company fails to adequately protect
intellectual property through patents, trademarks and copyrights, its intellectual property rights may be
misappropriated by others, invalidated or challenged, and our competitors could duplicate the Company’s
products or may otherwise limit any competitive design or manufacturing advantages. The Company
believes that success is likely to depend upon continued innovation, technical expertise, marketing skills,
branding, customer support and services rather than on legal protection of intellectual property rights.
However, the Company intends to aggressively assert its intellectual property rights when necessary.
The expiration or termination of our material trademarks, brand names and licensing agreements could
have a material adverse effect on the Company’s business.
The Company has invested substantial resources in developing and marketing the Company’s brands and
products over many years. The expiration or termination of one or more of the Company’s material
trademarks, patents or licensing agreements could result in the loss of such intellectual property. In such
event, the Company may not be able to recoup its investments in, and continue to benefit from the affected
brand names or products. The loss of such intellectual property and related rights could have a material
adverse effect on the Company.
Breaches of data or technology security could damage the Company’s reputation, cause the Company to
incur additional expense, expose the Company to litigation, and adversely affect the Company’s
business.
A breach of our data or technology security could result in an unauthorized transfer or release of Company
proprietary, employee, customer and other Company related information, or the loss of valuable business
data or technology, that could cause a disruption in our business. Hackers are increasingly sophisticated and
operate large scale and complex cyber security attacks. In the event of such an attack, we may expend
significant capital and other resources to protect against, respond to, and/or alleviate problems caused by a
breach. Such an event could also result in unwanted negative media attention, damage to the Company’s
reputation, damage to our customers, and result in lost sales and lawsuits. The Company also must comply
with increasingly complex regulatory cyber security and privacy standards, which can be costly and
negatively impact the Company’s profitability.
Unauthorized disclosure of sensitive or confidential customer information could harm the Company’s
business and its standing with its customers.
Through sales and marketing activities, the Company collects and stores certain information that customers
provide to purchase products or services or otherwise communicate and interact with the Company. Despite
instituted safeguards for the protection of such information, the Company cannot be certain that all of its
systems are entirely free from vulnerability to attack. Computer hackers may attempt to penetrate the
Company’s network security and, if successful, misappropriate confidential customer or business
information. In addition, an employee, a contractor or other third party with whom the Company does
business may attempt to circumvent the Company’s security measures in order to obtain such information
or inadvertently cause a breach involving such information. Loss of customer or business information could
disrupt operations, damage the Company’s reputation, and expose the Company to claims from customers,
financial institutions, payment card associations and other persons, any of which could have an adverse
effect on the Company’s business, results of operations and financial condition. In addition, compliance with
tougher privacy and information security laws and standards may result in significant expense due to
increased investment in technology and the development of new operational processes.
Cybersecurity breaches or other data security incidents could result in unauthorized access, theft,
modification, or destruction of Company assets, including bank accounts, intellectual property, and
confidential information, which may adversely affect the Company’s business.
The Company has experienced an increase in cybersecurity threats and attempts to breach the Company’s
security networks. The techniques used to conduct cyber attacks, including phishing, hacking, and malicious
software, are increasingly sophisticated and the sources and targets of these attacks change frequently. Cyber
attacks may not be recognized until after attacks have been launched successfully or have been in place for
a period of time. From time to time, the Company has been, and likely will continue to be, the target of cyber
and other security threats. To the Company’s knowledge, the Company has not experienced a significant
cybersecurity breach that had a material impact on the Company’s business or operating results, although
there can be no assurance that the Company’s efforts to maintain the security of the Company’s information
technology networks and related systems will be effective or that attempted security breaches will not be
damaging in the future. The Company maintains cyber liability insurance, however, such insurance may not
be sufficient to cover the financial, legal, business or reputational losses that could result from a breach of
the Company’s systems.
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The Company’s business involves the potential for product recalls, warranty liability, product liability,
and other claims against us, which could adversely affect our reputation, earnings and financial
condition.
As a manufacturer, marketer and distributor of consumer products, the Company is subject to the United
States Consumer Products Safety Act of 1972, as amended by the Consumer Product Safety Improvement
Act of 2008, which empowers the Consumer Products Safety Commission (“CPSC”) to recall or exclude
from the market products that are found to be unsafe or hazardous. Although recalls of our products have
been infrequent, the Company’s subsidiaries voluntarily recalled the Ping Pong Avenger table tennis table
in 2021 due to concerns that it could create a potential fall risk to consumers and certain Goalsetter wall-
mounted basketball goals in 2022 that could detach and fall to the ground unexpectedly if not installed
correctly. Notwithstanding that we extensively and rigorously test our products, there can be no assurance
we will be able to detect, prevent, or fix all defects and safety concerns. Under certain circumstances, the
CPSC could require us to repurchase or recall additional products, even if we disagree with the defect
determination or have data that shows the actual safety risk to be nominal. Any repurchase or recall of our
products, monetary judgment, fine or other penalty could be costly and damaging to our reputation and/or
adversely affect our brands. Furthermore, the occurrence of any material defects in our products could
expose us to liability for warranty claims in excess of our current reserves, and/or to product liability claims
that could exceed the limits of our insurance coverage, to the extent coverage may exist. If our warranty
reserves and/or insurance coverage are inadequate to cover future warranty claims and/or potential product
liability claims, our financial condition and operating results may be harmed.
The Company may be subject to various types of litigation, and our insurance may not be sufficient to
cover damages related to those claims.
From time-to-time the Company may be involved in lawsuits or other claims arising in the ordinary course
of business, including those related to product liability, consumer protection, employment, intellectual
property, tort, privacy and data protection, and other matters. The Company may incur losses relating to
claims filed against it, including costs associated with defending against such claims, and there is risk that
any such claims or liabilities will exceed its insurance coverage, or affect the Company’s ability to retain
adequate liability insurance in the future. Even if a claim is unsuccessful or is not fully pursued, the negative
publicity surrounding any such assertions could adversely affect the Company’s reputation. Due to the
inherent uncertainties of litigation and other claims, we cannot accurately predict the ultimate outcome of
any such matters.
Unseasonable or extreme weather conditions, alone or together with natural disasters, as well as other
catastrophic events, could adversely affect the Company’s business and results of operations.
Unseasonable or extreme weather conditions, natural disasters and other catastrophic events could negatively
impact consumer shopping patterns, consumer confidence and disposable income, or otherwise could have
a negative effect on the company’s financial performance. The Company’s business is susceptible to
unseasonable weather conditions, particularly as it relates to sports equipment and recreational outdoor
products, which could lead to lost sales or greater than expected markdowns. For example, extended periods
of unseasonably warm temperatures during the winter season or cool weather during the summer season
could reduce demand for a portion of the Company’s inventory and thereby reduce sales and profitability.
In addition, extreme weather conditions, natural disasters and other catastrophic events could damage or
destroy our facilities, cause staffing shortages or make it difficult for customers to travel to stores and dealers
where the Company’s products are sold. Such events and circumstances could negatively affect the
Company’s business and results of operations from time to time.
The COVID-19 pandemic continues to affect the Company’s business. Additional factors could
exacerbate such consequences and/or cause materially adverse effects.
While the COVID-19 pandemic did not materially adversely affect the Company’s financial results and
business operations in the Company’s fiscal year ended December 31, 2022, economic and health conditions
in the United States and across most of the globe changed rapidly during 2020, 2021 and 2022. Demand for
the Company’s products increased substantially in fiscal years 2020, 2021 and 2022 compared to pre-
pandemic sales. Such increased demand may not continue. Although the Company has largely resumed
normal operations, continuing impacts of the pandemic may result in future business and manufacturing
disruption, inventory shortages, delivery delays, and reduced sales and operations, any of which could
materially affect our business, financial condition, and results of operations.
The Company cannot predict the long-term impact of the COVID-19 pandemic on its customers,
suppliers, vendors, and other business partners.
The COVID-19 pandemic has affected the Company’s customers, suppliers, vendors, and other business
partners, but the Company is not able to predict the ultimate consequences that will result therefrom.
Although the Company’s largest customer performed well throughout the pandemic, it remains to be seen if
consumer demand for online purchasers will continue unabated and/or permanently change the way in which
consumers make purchasing decisions. The Company’s second largest customer and many of the Company’s
other mass merchant customers experienced increased online orders and reduced foot traffic into their
physical stores. In general, many retailers experienced severe financial difficulties and bankruptcies. If those
trends persist over the long-term, the Company’s strategies in distributing and marketing its products may
need to change accordingly. If the Company’s sales channels are substantially impaired for an extended
period of time or fail to adapt to changing consumer preferences, the Company’s sales will be materially
reduced.
The ultimate magnitude of the COVID-19 pandemic is unpredictable, volatile and uncertain.
The COVID-19 pandemic created significant public health concerns and economic disruption and may
continue to do so indefinitely. We cannot predict the full impact of the pandemic nor can we predict with
any certainty whether and to what degree the disruptions caused by the pandemic and reactions thereto will
continue. Much is still unknown, including the duration and severity of the pandemic, the amount of time it
may take for more normalized economic activity to resume, future government actions that may be taken,
the effects on the Company’s customers and suppliers, including their ability to pay for our products, the
effects on operations of the Company’s logistics providers, and the impact on the ability of the Company’s
employees to work and travel. Continuing and potential new governmental actions may further cause the
Company to modify its business operations or otherwise adversely impact the Company. While the Company
has taken numerous steps to mitigate the potential negative effects of the COVID-19 pandemic, there can be
no assurance that the Company will be able to respond quickly enough or appropriately to circumstances
that may change rapidly and/or that are outside of our control. The long-term impact of the pandemic on the
Company’s business is unknown and ultimately could result in material adverse effects on the Company’s
business, financial performance and results of operations.
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The market price of the Company’s common stock is likely to be highly volatile as the stock market in
general can be highly volatile.
RISKS OF INTERNATIONAL OPERATIONS
The public trading of the Company’s common stock is based on many factors which could cause fluctuation
in the Company’s stock price. These factors may include, among other things:
General economic and market conditions;
Actual or anticipated variations in quarterly operating results;
Limited research coverage by securities analysts;
Relatively low market capitalization resulting in low trading volume in the Company’s stock;
If securities analysts provide coverage, our inability to meet or exceed securities analysts' estimates
or expectations;
Conditions or trends in the Company’s industries;
Changes in the market valuations of other companies in the Company’s industries;
Announcements by the Company or the Company’s competitors of significant acquisitions, strategic
partnerships, divestitures, joint ventures or other strategic initiatives;
Capital commitments;
Additions or departures of key personnel;
Tariffs, quotas, customs, import and export restrictions, and other trade barriers;
Global events, including acts or threats of war or terrorism, international conflicts, political
instability, natural disasters, and public health crises (such as the COVID 19 pandemic);
Sales and repurchases of the Company’s common stock; and
The ability to maintain listing of the Company’s common stock on the NASDAQ Global Market
and/or inclusion in market indices such as the Russell 2000.
Many of these factors are beyond the Company’s control. These factors may cause the market price of the
Company’s common stock to decline, regardless of operating performance.
If we are unable to pay quarterly dividends at intended levels, our reputation and stock price may be
harmed.
Our quarterly cash dividend is currently $0.15 per common share. The dividend program requires the use of
a portion of our cash flow. Our ability to pay dividends will depend on our ability to generate sufficient cash
flows from operations in the future. This ability may be subject to certain economic, financial, competitive
and other factors that are beyond our control. Our Board of Directors (Board) may, at its discretion, increase
or decrease the intended level of dividends or entirely discontinue the payment of dividends at any time.
Any failure to pay dividends after we have announced our intention to do so may negatively impact our
reputation, investor confidence in us and negatively impact our stock price.
International operations expose the Company to the unique risks inherent in foreign operations.
The Company sources many of its products and raw materials from Mexico, Brazil, China, Vietnam and
other Asian countries. Foreign operations encounter risks similar to those faced by U.S. operations, as well
as risks inherent in foreign operations, such as local customs and regulatory constraints, control over product
quality and content, foreign trade policies, competitive conditions, foreign currency fluctuations and unstable
political and economic conditions. Additionally, our international operations may be adversely affected by
political events, domestic or international terrorist events and hostilities, complications due to natural,
nuclear or other disasters, or public health crises. For instance, recent government changes in Mexico have
yielded requirements that call for increases in minimum wages at the border as well as the interior of Mexico.
In addition, beginning in 2020 and continuing into 2021 and 2022, the coronavirus outbreak has resulted in
increased travel restrictions and extended shutdown of certain businesses in Mexico, China and other
countries in which the Company does business or has suppliers. These or any further political or
governmental developments or health concerns in locations in which the Company conducts business could
result in social, economic and labor instability. These uncertainties could have a material adverse effect on
the continuity of the Company’s operations and on the Company’s income and profitability.
The Company’s business is subject to risks associated with sourcing and manufacturing outside of the
United States, and risks arising from tariffs and/or international trade wars.
The Company imports many of its raw materials and finished goods from countries outside of the United
States, including but not limited to China and Mexico. The Company’s ability to import products in a timely
and cost-effective manner may be affected by conditions, such as public health crises, labor disputes,
political unrest, and security requirements of the U.S. and other countries that could delay importation of
products or require us to locate alternative sources. Our import operations are subject to complex custom
laws, regulations, tax requirements, and trade regulations, such as tariffs set by governments through mutual
agreements or bilateral actions. U.S. tariffs on goods imported into the U.S., particularly goods from China,
have increased the cost of goods purchased by the Company and the ongoing adverse effects of such tariffs
potentially could become even more severe. The overall effect of these risks is that our costs may increase,
which in turn may result in lower profitability if we are unable to offset such increases through higher prices,
and/or that we may suffer a decline in sales if our customers do not accept price increases.
The United States, Mexico and Canada have entered into the United States-Mexico-Canada Agreement
("USMCA"), the successor agreement to the North American Free Trade Agreement ("NAFTA") which
became effective on July 1, 2020. In January 2020, the United States entered into a "Phase 1" trade agreement
with China. The Phase 1 agreement expired December 31, 2021 and has not been extended or replaced.
Trade negotiations between the United States and China regarding a potential new trade agreement have not
progressed and prospects for a new agreement are highly uncertain. Accordingly, it remains unclear what
the U.S. administration or foreign governments, including China, specifically will or will not do with respect
to tariffs, the USMCA or other international trade agreements and policies. A trade war, other governmental
action related to tariffs or international trade agreements, changes in U.S. social, political, regulatory and
economic conditions or in laws and policies governing foreign trade, manufacturing, development and
investment in the territories and countries where we currently manufacture and sell products or any resulting
negative sentiments towards the United States could materially adversely affect the Company’s business,
financial condition, operating results and cash flows.
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Substantially all of our import operations are subject to customs and tax requirements as well as trade
regulations, such as tariffs and quotas set by governments through mutual agreements or bilateral actions. In
addition, the countries in which our products are manufactured or imported may from time to time impose
additional quotas, duties, tariffs or other restrictions on our imports or adversely modify existing restrictions.
Adverse changes in these import costs and restrictions, or our suppliers' failure to comply with customs
regulations or similar laws, could harm our business. In this regard, possible changes in U.S. policies and
the potential effects of Brexit have introduced greater uncertainty with respect to future tax and trade
regulations. Changes in tax policy or trade regulations, such as the disallowance of tax deductions on
imported merchandise or the imposition of new tariffs on imported products, could have a material adverse
effect on our business and results of operations.
Our operations are also subject to the effects of international trade agreements and regulations that impose
requirements that could adversely affect our business, such as setting quotas on products that may be
imported from a particular country.
The Company could be adversely affected by changes in currency exchange rates and/or the value of the
United States dollar.
The Company is exposed to risks related to the effects of changes in foreign currency exchange rates and
the value of the United States dollar. Changes in currency exchange rates and the value of the United States
dollar can have a significant impact on earnings. While the Company carefully watches fluctuations in
currency exchange rates, these types of changes can have material adverse effects on the Company’s
business, results of operations and financial condition.
LEGAL, TAX, ACCOUNTING AND REGULATORY RISKS
The Company is subject to risks associated with laws and regulations related to health, safety and
environmental protection.
Products, and the production and distribution of products, are subject to a variety of laws and regulations
relating to health, safety and environmental protection. Laws and regulations relating to health, safety and
environmental protection have been passed in several jurisdictions in which the Company operates in the
United States and abroad. Although the Company does not anticipate any material adverse effects based on
the nature of operations and the thrust of such laws, there is no assurance such existing laws or future laws
will not have a material adverse effect on the Company’s business, results of operations and financial
condition.
New laws, policies, regulations, rulemaking and oversight, as well as changes to those currently in effect,
could adversely impact our earnings, cash flows and operations.
Our assets and operations are subject to regulation and oversight by federal, state, and local regulatory
authorities. Legislative changes, as well as regulatory actions taken by these agencies, have the potential to
adversely affect our profitability. In addition, a certain degree of regulatory uncertainty is created by the U.S.
political climate. It remains unclear specifically what the current presidential administration, Congress and
the courts may do with respect to future policies, regulations and legal decisions that may affect us.
Regulation affects many aspects of our business and extends to such matters as (i) federal, state, and local
taxation; (ii) rates (which include tax, commodity, surcharges and fuel); (iii) the integrity, safety and security
of facilities and operations; (iv) environmental, social and governance issues that could impact the way we
conduct our business; (v) the acquisition of other businesses; (vi) the acquisition, extension, disposition or
abandonment of services or facilities; (vii) reporting and information requirements; and (viii) the
maintenance of accounts and records.
The preparation of the Company’s financial statements requires the use of estimates that may vary from
actual results.
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make significant estimates that may affect financial
statements. Due to the inherent nature of making estimates, actual results may vary substantially from such
estimates, which could materially adversely affect the Company’s business, results of operations and
financial condition. For more information on the Company’s critical accounting estimates, please see the
Critical Accounting Estimates section of this Form 10-K.
Changes in accounting standards could impact reported earnings and financial condition.
The accounting standard setters, including the Financial Accounting Standards Board and the Securities and
Exchange Commission, periodically change the financial accounting and reporting standards that govern the
preparation of the Company’s consolidated financial statements. These changes can be hard to predict and
apply and can materially affect how the Company records and reports its financial condition and results of
operations. In some cases, the Company could be required to apply a new or revised standard retrospectively,
which may result in the restatement of prior period financial statements.
MACROECONOMIC AND GENERAL BUSINESS RISKS
Operating results may be impacted by changes in the economy that influence business and consumer
spending.
Operating results are directly impacted by the health of the North American and to a lesser extent, European
and Asian economies. We cannot predict how robust the economy will be or whether or not it will be
sustained. If economic recovery is slow to occur, or if the economy experiences a prolonged period of
decelerating or negative growth, the Company’s results of operations may be negatively impacted. In
general, the Company’s sales depend on discretionary spending by consumers. Business and financial
performance may be adversely affected by current and future economic conditions, including unemployment
levels, energy costs, interest rates, recession, inflation, the impact of natural disasters and terrorist activities,
public health crisis, and other matters that influence business and consumer spending.
Fluctuation in economic conditions could prevent the Company from accurately forecasting demand for
its products which could adversely affect its operating results or market share.
Fluctuation in economic conditions and market instability in the United States and globally makes it difficult
for the Company, customers and suppliers to accurately forecast future product demand trends, which could
cause the Company to produce and/or purchase excess products that can increase inventory carrying costs
and result in obsolete inventory. Alternatively, this forecasting difficulty could cause a shortage of products,
or materials used in products, that could result in an inability to satisfy demand for products and a loss of
market share.
Failure to sustain a continuing economic recovery in the United States and elsewhere could have a
substantial adverse effect on our business.
Our business is tied to general economic and industry conditions as demand for sporting goods depends
largely on the strength of the economy, employment levels, consumer confidence levels and the availability
and cost of credit. These factors have had and could continue to have a substantial impact on our business.
Adverse global economic conditions could also cause our customers and suppliers to experience severe
economic constraints in the future, including bankruptcy, which could have a material adverse impact on
our financial position and results of operations.
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Quarterly operating results are subject to fluctuation.
These risks are not exhaustive.
Operating results have fluctuated from quarter to quarter in the past, and the Company expects that they will
continue to do so in the future. Factors that could cause these quarterly fluctuations include the following:
international, national and local general economic and market conditions; the size and growth of the overall
sporting goods markets; intense competition among manufacturers, marketers, distributors and sellers of
products; demographic changes; changes in consumer preferences; popularity of particular designs,
categories of products and sports; seasonal demand for products; adverse weather conditions that may create
fluctuations in demand for certain of our products; the size, timing and mix of purchases of products;
fluctuations and difficulty in forecasting operating results; ability to sustain, manage or forecast growth and
inventories; new product development and introduction; ability to secure and protect trademarks, patents and
other intellectual property; performance and reliability of products; customer service; the loss of significant
customers or suppliers; dependence on distributors; business disruptions; disruptions or delays in our supply
chain, including potential disruptions or delays arising from political unrest, war, labor strikes, natural
disasters, and public heath crises such as the coronavirus pandemic; increased costs of freight and
transportation to meet delivery deadlines; changes in business strategy or development plans; general risks
associated with doing business outside the United States, including, without limitation: exchange rates,
import duties, tariffs, quotas and political and economic instability; changes in government regulations; any
liability and other claims asserted against the Company; ability to attract and retain qualified personnel; and
other factors referenced or incorporated by reference in this Form 10-K and any other filings with the
Securities and Exchange Commission.
Terrorist attacks, acts of war, natural disasters, and public health crises may seriously harm the
Company’s business.
Among the chief uncertainties facing the nation and the world and, as a result, our business, is the instability
and conflict in the Middle East and uncertainties regarding North Korea, Russia, China and other Asian and
European countries. Obviously, no one can predict with certainty what the overall economic impact will be
as a result of these circumstances. Terrorist attacks may cause damage or disruption to the Company,
employees, facilities and customers, which could significantly impact net sales, costs and expenses and
financial condition. The potential for future terrorist attacks, the national and international responses to
terrorist attacks, and other acts of war and hostility may cause greater uncertainty and cause business to
suffer in ways the Company currently cannot predict.
In addition, any natural disaster or other serious disruption to one of the Company’s manufacturing or
distribution sites due to fire, tornado, earthquake or other natural disasters in countries where the Company
conducts business, or political unrest, war, labor strikes, work stoppages or public health crises, such as
outbreaks of the coronavirus in countries where our suppliers are located could result in the disruption of the
Company’s shipments and supply chain of products and raw materials. Although we have continued to obtain
product shipments from China and other countries notwithstanding the coronavirus pandemic, product
shipments from China and/or other countries may be delayed in the future. Although we are monitoring the
situation and have adapted our ordering practices in our attempt to minimize the effects of potential
disruptions, the Company cannot predict whether, for how long, or the extent to which the pandemic may
disrupt the Company’s supply chain, manufacturing operations, and/or product shipments. Any significant
disruption resulting from similar events on a large scale or over a prolonged period could cause significant
delays until the Company would be able to resume normal operations or shift to other third party suppliers,
if needed. There can be no assurance that alternative capacity could be obtained on favorable terms, if at all,
and could negatively affect the Company’s sales and profitability.
Other sections of this Form 10-K may include additional factors which could adversely impact the
Company’s business and financial performance. Moreover, the Company operates in a very competitive and
rapidly changing environment. New risk factors emerge from time to time and it is not possible for
management to predict all risk factors, nor can the Company assess the impact of all factors on business or
the extent to which any factor, or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Given these risks and uncertainties, investors should not
place undue reliance on forward-looking statements as a prediction of actual results.
ITEM 1B—UNRESOLVED STAFF COMMENTS
None.
ITEM 2—PROPERTIES
At December 31, 2022, the Company owned or operated from the following locations:
Location
Evansville, Indiana, USA
Rosarito, Mexico
Gainesville, Florida, USA
Orlando, Florida, USA
Square
Footage
Owned or
Leased
Use
771,000
161,139
154,200
143,000
Owned
Distribution; sales and marketing;
engineering; administration
Manufacturing and distribution
Owned
Owned
Manufacturing and distribution
Leased Marketing; manufacturing and
Bristol, WI, USA
118,350
Owned
Olney, Illinois, USA
108,500
Owned
Olney, Illinois, USA
Eagan, MN, USA
30,000
41,600
Owned
Leased
Shanghai, China
6,674
Leased
distribution
Distribution; sales and marketing;
engineering
Distribution; sales and marketing;
engineering; manufacturing
Distribution
Distribution; sales and marketing;
engineering
Sales and sourcing
The Company believes that its facilities are in satisfactory and suitable condition for their respective operations.
The Company also believes that it is in material compliance with all applicable environmental regulations and
is not subject to any proceeding by any federal, state or local authorities regarding such matters. The Company
provides regular maintenance and service on its plants and machinery as required. As of December 31, 2022,
our Rosarito, Mexico location, including land, buildings and long-lived assets, were classified as assets held
for sale.
ITEM 3—LEGAL PROCEEDINGS
The Company is involved in litigation arising in the normal course of its business, but the Company does not
believe that the disposition or ultimate resolution of such claims or lawsuits will have a material adverse effect
on the business or financial condition of the Company.
The Company is not aware of any probable or levied penalties against the Company relating to the American
Jobs Creation Act.
ITEM 4—MINE SAFETY DISCLOSURES
Not applicable.
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Part II
Forward-Looking Statements
ITEM
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
5—MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED
The Company's common stock is traded under the symbol “ESCA” on the NASDAQ Global Market.
As of February 17, 2023, there were approximately 97 stockholders of record of our common stock, although
there is a significantly larger number of beneficial owners of our common stock.
ISSUER PURCHASES OF EQUITY SECURITIES
(a) Total
Number of
Shares (or
Units)
Purchased
(b) Average
Price Paid per
Share (or Unit)
(c) Total
Number of
Shares (or Units)
Purchased as
Part of Publicly
Announced
Plans or
Programs
(d) Maximum
Number (or
Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or
Programs
2,153,132
$13.38
2,153,132
$ 4,153,252
None
None
None
None
None
None
No Change
No Change
No Change
No Change
No Change
No Change
Period
Share purchases prior to
10/1/2022 under the
current repurchase
program.
Fourth quarter purchases:
10/2/2022 – 10/29/2022
10/30/2022 – 11/26/2022
11/27/2022 – 12/31/2022
Total share purchases under
the current program
2,153,132
$13.38
2,153,132
$ 4,153,252
The Company has one stock repurchase program which was established in February 2003 by the Board of
Directors and which initially authorized management to expend up to $3,000,000 to repurchase shares on
the open market as well as in private negotiated transactions. In February 2005, February 2006, August 2007
and February 2008 the Board of Directors increased the remaining balance on this plan to its original level
of $3,000,000. In September 2019, the Board of Directors increased the stock repurchase program from
$3,000,000 to $5,000,000. In December 2020, the Board of Directors increased the stock repurchase program
to $15,000,000. From its inception date through December 31, 2022, the Company has repurchased
2,153,132 shares of its common stock under this repurchase program for an aggregate price of $28,812,686.
The repurchase program has no termination date and there have been no share repurchases that were not part
of a publicly announced program.
ITEM 6—[RESERVED]
ITEM 7—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following section should be read in conjunction with Item 1: Business; Item 1A: Risk Factors; and Item 8:
Financial Statements and Supplementary Data.
This report contains forward-looking statements relating to present or future trends or factors that are subject
to risks and uncertainties. These risks include, but are not limited to: specific and overall impacts of the
COVID-19 global pandemic on Escalade’s financial condition and results of operations; the impact of
competitive products and pricing; product demand and market acceptance; new product development;
Escalade’s ability to achieve its business objectives, especially with respect to its Sporting Goods business on
which it has chosen to focus; Escalade’s ability to successfully achieve the anticipated results of strategic
transactions, including the integration of the operations of acquired assets and businesses and of divestitures or
discontinuances of certain operations, assets, brands, and products; the continuation and development of key
customer, supplier, licensing and other business relationships; Escalade’s ability to develop and implement our
own direct to consumer e-commerce distribution channel; Escalade’s ability to successfully negotiate the
shifting retail environment and changes in consumer buying habits; the financial health of our customers;
disruptions or delays in our business operations, including without limitation disruptions or delays in our supply
chain, arising from political unrest, war, labor strikes, natural disasters, public health crises such as the
coronavirus pandemic, and other events and circumstances beyond our control; Escalade’s ability to control
costs; Escalade’s ability to successfully implement actions to lessen the potential impacts of tariffs and other
trade restrictions applicable to our products and raw materials, including impacts on the costs of producing our
goods, importing products and materials into our markets for sale, and on the pricing of our products; general
economic conditions, including inflationary pressures; fluctuation in operating results; changes in foreign
currency exchange rates; changes in the securities markets; continued listing of the Company’s common stock
on the NASDAQ Global Market; the Company’s inclusion or exclusion from certain market indices;
Escalade’s ability to obtain financing and to maintain compliance with the terms of such financing; the
availability, integration and effective operation of information systems and other technology, and the potential
interruption of such systems or technology; the potential impact of actual or perceived defects in, or safety of,
our products, including any impact of product recalls or legal or regulatory claims, proceedings or
investigations involving our products; risks related to data security of privacy breaches; the potential impact of
regulatory claims, proceedings or investigations involving our products; and other risks detailed from time to
time in Escalade’s filings with the Securities and Exchange Commission. Escalade’s future financial
performance could differ materially from the expectations of management contained herein. Escalade
undertakes no obligation to release revisions to these forward-looking statements after the date of this report.
Overview
Escalade, Incorporated (Escalade, the Company, we, us or our) is focused on growing its Sporting Goods
segment through organic growth of existing categories, strategic acquisitions, and new product development.
The Sporting Goods segment competes in a variety of categories including basketball goals, archery, indoor
and outdoor recreation and fitness products. Strong brands and on-going investment in product development
provide a solid foundation for building customer loyalty and continued growth.
Within the sporting goods industry, the Company has successfully built a robust market presence in several
niche markets. This strategy is heavily dependent on expanding our customer base, barriers to entry, strong
brands, excellent customer service and a commitment to innovation. A key strategic advantage is the
Company’s established relationships with major customers that allow the Company to bring new products to
market in a cost-effective manner while maintaining a diversified portfolio of products to meet the demands of
consumers. In addition to strategic customer relations, the Company has substantial manufacturing and import
experience that enable it to be a reliable and low-cost supplier.
To enhance growth opportunities, the Company has focused on promoting new product innovation and
development and brand marketing. In addition, the Company has embarked on a strategy of acquiring
companies or product lines that complement or expand the Company's existing product lines or provide
expansion into new or emerging categories in sporting goods. A key objective is the acquisition of product
lines with barriers to entry that the Company can take to market through its established distribution channels
or through new market channels. Significant synergies are achieved through assimilation of acquired product
lines into the existing Company structure.
20
20
21
21
In October 2020, the Company acquired the assets of the billiard table, game room, and recreational product
lines of American Heritage Billiards, including the related intellectual property. In December 2020, the
Company acquired substantially all of the business and assets of Revel Match LLC, dba RAVE Sports, a brand
known for its innovative and high-quality water recreation products. In January 2022, the Company acquired
the assets of the Brunswick Billiards® business, complementing its existing portfolio of billiards brands and
other offerings in the Company’s indoor recreation market. These and other acquisitions strengthen the
Company’s leadership in various product categories, while providing exciting new opportunities within the
growing water sports market. The Company also sometimes divests or discontinues certain operations, assets,
and products that do not perform to the Company's expectations or no longer fit with the Company's strategic
objectives.
Management believes that key indicators in measuring the success of these strategies are revenue growth,
earnings growth, new product introductions, and the expansion of channels of distribution. The following table
sets forth the annual percentage change in revenues and net income over the past three years:
Net revenue
Sporting Goods
Total
Net income
Sporting Goods
Total
2022
2021
2020
0.1%
0.1%
14.6%
14.6%
51.6%
51.6%
(26.4%)
(26.3%)
(7.3%)
(5.9%)
293.9%
257.3%
As the impact of the COVID-19 pandemic evolves and may be waning, the Company continues to respond to
the challenges and opportunities arising from the pandemic. Even though the pandemic may not have had a
material adverse direct effect on the Company, the pandemic’s effects on the global supply chain, higher freight
and materials costs, supplier product delays, workforce availability and labor costs have caused operational
challenges for the Company. The ultimate extent of the effects of the COVID-19 pandemic on the Company is
highly uncertain and will depend on future developments, and such effects could exist for an extended period
of time. Consumer demand for the Company’s products may be slowing due to additional factors such as
general economic conditions, inflation, recessionary fears, rising interest rates, changes in the housing market
and declining consumer confidence. 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-K, the Company’s results
of operations for the 2022 fiscal year are not necessarily indicative of the results to be expected for fiscal year
2023.
Results of Operations
The following schedule sets forth certain consolidated statement of operations data as a percentage of net
revenue:
Net revenue
Cost of products sold
Gross margin
Selling, administrative and general expenses
Amortization
Operating income
2022
100.0%
76.5%
23.5%
14.3%
0.8%
8.4%
2021
100.0%
75.4%
24.6%
13.8%
0.6%
10.2%
2020
100.0%
72.7%
27.3%
14.7%
0.5%
12.1%
22
22
Revenue and Gross Margin
Net revenue increased 0.1% in 2022 compared to 2021. The Company recognized increased sales due to the
Brunswick Billiards acquisition completed in January 2022 and increases in pickleball and indoor games
categories due to category growth and market share gains. These increases were partially offset with lower
sales in our outdoor categories including archery, basketball, games, water sports and playground.
The overall gross margin decreased to 23.5% in 2022 compared with 24.6% in 2021. Gross margins were
unfavorably impacted by increased logistics expenses associated with ongoing inventory handling and
storage costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) were $44.8 million in 2022 compared to $43.4 million
in 2021, an increase of $1.4 million or 3.2%. The increase in SG&A is attributable to the Brunswick Billiards
acquisition completed in 2022. SG&A as a percent of sales is 14.3% in 2022 compared with 13.8% in 2021.
Provision for Income Taxes
The effective tax rate for 2022 and 2021 was 20.5% and 20.1%, respectively. The 2022 effective tax rate is
slightly lower than the federal statutory rate primarily due to the captive insurance premiums being tax
exempt, with federal income tax credits helping to offset the impact of the state taxes and lower the statutory
rate. The 2021 effective tax rate is slightly lower than the federal statutory rate primarily due to the captive
insurance premiums being tax exempt, with federal income tax credits helping to offset the impact of the
state taxes and lower the statutory rate.
Sporting Goods
Net revenues, operating income, and net income for the Sporting Goods segment for the three years ended
December 31, 2022 were as follows:
In Thousands
2022
2021
2020
Net revenue
Operating income
Net income
$313,757
25,925
16,117
$313,612
31,534
21,892
$273,649
32,685
23,625
Net revenue increased 0.1% in 2022 compared to 2021.
Gross margin in 2022 was 23.5% compared to 24.6% in 2021. Gross margins were unfavorably impacted by
increased logistics expenses associated with ongoing inventory handling and storage costs. Operating
income, as a percentage of net revenue, decreased to 8.3% in 2022 compared to 10.1% in 2021.
Financial Condition and Liquidity
The current ratio, a basic measure of liquidity (current assets divided by current liabilities), for 2022 was 4.8,
compared to 3.5 in 2021. Receivable levels decreased to $57.4 million in 2022 compared with $66.0 million
in 2021 and net inventory increased $29.5 million to $121.9 million in 2022 from $92.4 million in 2021, due
partially to the acquisition of Brunswick Billiards. Trade accounts payable and accrued liabilities decreased
$9.5 million to $30.7 million from $40.2 million in 2021.
The Company’s working capital requirements are primarily funded through cash flows from operations and
revolving credit agreements with its bank. During 2022, the Company’s maximum borrowings under its
primary revolving credit lines and overdraft facility totaled $113.8 million compared to $69.2 million in
2021. The overall effective interest rate in 2022 was 3.8% compared to the effective rate of 2.9% in 2021.
Total debt at the end of the Company’s 2022 fiscal year was $94.9 million.
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23
On January 21, 2022, the Company and its wholly owned subsidiary, Indian Industries, Inc. (“Indian”), entered
into an Amended and Restated Credit Agreement (the “2022 Restated Credit Agreement”) with its issuing
bank, JPMorgan Chase Bank, N.A. (“Chase”), and the other lenders identified in the Restated Credit
Agreement (collectively, the “Lenders”). The 2022 Restated Credit Agreement amended and restated the
Amended and Restated Credit Agreement dated as of January 21, 2019, as amended, in its entirety, and
continues the existing Company’s credit facilities which have been in place since April 30, 2009. The
Company’s indebtedness under the 2022 Restated Credit Agreement continues to be collateralized by liens on
all of the present and future equity of each of the Company’s domestic subsidiaries and substantially all of the
assets of the Company (excluding real estate). Under the terms of the 2022 Restated Credit Agreement, Old
National Bank was added as a Lender. The Lenders have now made available to Escalade and Indian a senior
revolving credit facility with increased maximum availability of $65.0 million (the “Revolving Facility”), up
from $50.0 million, plus an accordion feature that would allow borrowings up to $90.0 million under the
Revolving Facility subject to certain terms and conditions. The maturity date of the revolving credit facility
was extended to January 21, 2027. The Company may prepay the Revolving Facility, in whole or in part, and
reborrow prior to the revolving loan maturity date. The 2022 Restated Credit Agreement further extended the
maturity date for the existing $50.0 million term loan facility to January 21, 2027.
In addition to the increased borrowing amount and extended maturity date, the 2022 Restated Credit Agreement
provided a $7.5 million swingline commitment by Chase, replaced LIBOR with the replacement benchmark
secured overnight financing rate, and adjusted certain financial covenants relating to the fixed charge coverage
ratio.
On July 18, 2022, the Company entered into the First Amendment to the 2022 Restated Credit Agreement.
Under the terms of the First Amendment, the Lender increased the maximum availability under the senior
revolving credit facility from $65.0 million to $75.0 million pursuant to the accordion feature in the 2022
Restated Credit Agreement. The First Amendment also adjusted the funded debt to EBITDA ratio financial
covenant to 3:00 to 1:00 as of the end of the Company’s third and fourth fiscal quarters of 2022.
On October 26, 2022, the Company entered into the Second Amendment ("Second Amendment”) to the 2022
Restated Credit Agreement. Under the terms of the Second Amendment, the Lender increased the maximum
availability under the senior revolving credit facility from $75.0 million to $90.0 million pursuant to the
accordion feature in the 2022 Restated Credit Agreement. The Second Amendment adjusted the funded debt
to EBITDA ratio financial covenant to 3:25 to 1:00 as of the end of the Company’s third and fourth fiscal
quarters of 2022 and 3:00 to 1:00 as of the end of the Company’s first fiscal quarter of 2023. The Second
Amendment also modified the EBITDA definition to permit add-backs of a) up to $2.0 million for disposition
related expenses; and b) up to $2.0 million for unusual or non-recurring expenses which are incurred prior to
the end of fiscal year 2023 and which are subject to the approval of the Administrative Agent.
As of December 31, 2022, the outstanding principal amount of the term loan was $39.9 million and total amount
drawn under the Revolving Facility was $55.0 million.
Cash flows from operations and revolving credit agreements were used to fund acquisitions, to pay shareholder
dividends, and to fund stock repurchases.
In 2023, the Company estimates capital expenditures to be approximately $3.7 million.
The Company believes that cash generated from its projected 2023 operations and the commitment of
borrowings from its primary lender will provide it with sufficient cash flows for its operations.
It is possible that if economic conditions deteriorate, this could have adverse effects on the Company’s ability
to operate profitably during fiscal year 2023. To the extent that occurs, management will pursue cost
reduction initiatives and consider realignment of its infrastructure in an effort to match the Company’s
overhead and cost structure with the sales level dictated by current market conditions.
New Accounting Pronouncements
Refer to Note 1 to the consolidated financial statements under the sub-heading “New Accounting
Pronouncements”.
Contractual Obligations
The following schedule summarizes the Company’s material contractual obligations as of December 31, 2022:
Amounts in thousands
Total
2023
2024 – 2025 2026 – 2027 Thereafter
Debt(1)
Future interest payments(1)
Operating leases
Minimum payments under
purchase, royalty and license
agreements
$94,881
13,582
12,053
$7,143
3,488
1,454
$14,286
6,158
2,769
$73,452
3,936
2,560
$ --
--
5,270
4,567
898
1,145
1,219
1,305
Total
$125,083
$ 12,983
$ 24,358
$ 81,167
$ 6,575
Note:
(1) Assumes that the Company will not increase borrowings under its long-term credit agreements and that the
effective interest rate experienced in 2022 of 3.8% will continue for the life of the agreements.
Critical Accounting Estimates
The methods, estimates and judgments used in applying the Company’s accounting policies have a significant
impact on the results reported in its financial statements. Some of these accounting policies require difficult
and subjective judgments, often as a result of the need to make estimates of matters that are inherently
uncertain. The most critical accounting estimates are described below and in the Notes to the Consolidated
Financial Statements.
Product Warranty
The Company provides limited warranties on certain of its products for varying periods. Generally, the
warranty periods range from 30 days to one year. However, some products carry extended warranties of three-
year, five-year, seven-year, ten-year, fifteen-year, and lifetime warranties. The Company records 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. To the extent there are
product defects in current products that are unknown to management and do not fall within historical defect
rates, the product warranty reserve could be understated and the Company could be required to accrue
additional product warranty costs thus negatively affecting gross margin.
Inventory Valuation Reserves
The Company evaluates inventory for obsolescence and excess quantities based on demand forecasts over
specified time frames, usually one year. The demand forecast is based on historical usage, sales forecasts and
current as well as anticipated market conditions. All amounts in excess of the demand forecast are deemed to
be potentially excess or obsolete and a reserve is established based on the anticipated net realizable value. To
the extent that demand forecasts are greater than actual demand and the Company fails to reduce manufacturing
output accordingly, the Company could be required to record additional inventory reserves which would have
a negative impact on gross margin.
24
24
25
25
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon a review of outstanding receivables,
historical collection information and existing economic conditions. Accounts receivable are ordinarily due
between 30 and 60 days after the issuance of the invoice. Accounts are considered delinquent when more than
90 days past due. Delinquent receivables are reserved or written off based on individual credit evaluation and
specific circumstances of the customer. To the extent that actual bad debt losses exceed the allowance recorded
by the Company, additional reserves would be required which would increase selling, general and
administrative costs.
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.
Impairment of Goodwill
The Company reviews goodwill for impairment annually and whenever 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. A qualitative assessment is first performed to determine if the fair value of the reporting unit is
"more likely than not" less than the carrying value. If so, we proceed to a quantitative assessment, in which the
fair value of the reporting unit is compared to its carrying value. If the carrying value of goodwill exceeds the
fair value, an impairment charge to current operations is recorded to reduce the carrying value to the fair value.
If a quantitative assessment of goodwill impairment testing is required, the Company establishes fair value by
using an income approach or a combination of a market approach and an income approach. The market
approach uses the guideline-companies method to estimate the fair value of a reporting unit based on reported
sales of publicly-held entities engaged in the same or a similar business as the reporting unit. The income
approach uses the discounted cash flow method to estimate the fair value of a reporting unit by calculating
the present value of the expected future cash flows of the reporting unit. The discount rate is based on a
weighted average cost of capital determined using publicly-available interest rate information on the
valuation date and data regarding equity, size and country-specific risk premiums/decrements compiled and
published by a commercial source. The Company uses assumptions about expected future operating
performance in determining estimates of those cash flows, which may differ from actual cash flows.
The Company has one reporting unit that is identical to our operating segment, Sporting Goods. Of the total
recorded goodwill of $42.3 million at December 31, 2022, the entire amount was allocated to the Escalade
Sports reporting unit. The results of the qualitative impairment assessment of the Escalade Sports reporting
unit indicated that it was not “more likely than not” that the fair value of the reporting unit was less than the
carrying value as of December 31, 2022.
Long Lived Assets
The Company evaluates the recoverability of certain long-lived assets whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Estimates of future cash flows used
to test recoverability of long-lived assets include separately identifiable undiscounted cash flows expected
to arise from the use and eventual disposition of the assets. Where estimated future cash flows are less than
the carrying value of the assets, impairment losses are recognized based on the amount by which the carrying
value exceeds the fair value of the assets.
Capital Expenditures
As of December 31, 2022, the Company had no material commitments for capital expenditures. In 2023, the
Company estimates capital expenditures to be approximately $3.7 million.
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK [Not
Required]
ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Item 8 are set forth in Part IV, Item 15.
ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 9A —CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Escalade maintains disclosure controls and procedures that are designed to ensure that information required to
be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within
the time periods specified in the SEC’s rules and forms, and that such information is accumulated and
communicated to the Company’s management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition
of “disclosure controls and procedures” in Rules 13a-15(e) and 15d-15(e). In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and procedures, no matter how
well designed and operated, could provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
The Company carried out an evaluation, under the supervision and with the participation of the Company’s
management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of
the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief
Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
Escalade’s management is responsible for establishing and maintaining adequate internal control over financial
reporting for the Company. Escalade’s internal control system was designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. Internal control over financial reporting of the
Company includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions of the Company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s
financial statements.
26
26
27
27
All internal control systems, no matter how well designed, have inherent limitations, including the possibility
of human error or circumvention through collusion or improper overriding of controls. Therefore, even those
internal control systems determined to be effective can provide only reasonable assurance with respect to
financial statement preparation. Further, because of changes in conditions, the effectiveness of internal
control may vary over time.
The management of Escalade assessed the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2022. In making its assessment of internal control over financial reporting,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control – Integrated Framework (published in 2013) and implemented a
process to monitor and assess both the design and operating effectiveness of the Company’s internal controls.
Based on this assessment, management believes that, as of December 31, 2022, the Company’s internal control
over financial reporting was effective.
This annual report on Form 10-K includes an attestation report of the Company’s registered public accounting
firm regarding internal control over financial reporting. Management’s report regarding internal control over
financial reporting is subject to attestation by the Company’s registered public accounting firm pursuant to
rules of the Securities and Exchange Commission. In addition, this report by management regarding internal
control over financial reporting is specifically not incorporated by reference into any other filing by the
Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
/s/ Walter P. Glazer, Jr., Chief Executive Officer /s/ Stephen R. Wawrin, Chief Financial Officer
Changes in Internal Control over Financial Reporting
Management of the Company has evaluated, with the participation of the Company’s Chief Executive
Officer and Chief Financial Officer, changes in the Company’s internal controls over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2022. In
connection with such evaluation, there have been no changes to the Company’s internal control over
financial reporting that occurred since the beginning of the Company’s fourth quarter of 2022 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
ITEM 9B — OTHER INFORMATION
None.
ITEM 9C — DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.
Not applicable.
Part III
ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required under this item with respect to Directors and Executive Officers is contained in the
registrant's Proxy Statement relating to its annual meeting of stockholders scheduled to be held on May 10,
2023 under the captions “Certain Beneficial Owners,” “Election of Directors,” “Executive Officers of the
Registrant,” “Board of Directors, Its Committees, Meetings and Functions,” and “Delinquent Section 16(a)
Reports,” if applicable, and is incorporated herein by reference.
ITEM 11— EXECUTIVE COMPENSATION
Information required under this item is contained in the registrant's Proxy Statement relating to its annual
meeting of stockholders scheduled to be held on May 10, 2023 under the captions “Compensation Discussion
and Analysis,” “Compensation Committee Interlocks and Insider Participation,” “Report of the Compensation
Committee” and “Executive Compensation” and is incorporated herein by reference, except that the
information required by Item 407(e)(5) of Regulation S-K which appears under the caption “Report of the
Compensation Committee” is specifically not incorporated by reference into this Form 10-K or into any other
filing by the registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934.
ITEM 12—SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Except for the information required by Item 201(d) of Regulation S-K, which is included below, information
required by this item is contained in the registrant’s proxy statement relating to its annual meeting of
stockholders scheduled to be held on May 10, 2023 under the captions “Certain Beneficial Owners” and
“Election of Directors” and is incorporated herein by reference.
Equity Compensation Plan Information
Plan Category
Equity compensation plans approved by
security holders (1)
Equity compensation plans not approved by
security holders
Total
Number of
Securities to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights (2)
Weighted-Average
Exercise Price
of Outstanding Options,
Warrants
and Rights
Number of
Securities Remaining
Available for Future
Issuance Under Equity
Compensation Plans
--
--
--
--
--
996,461
--
996,461
(1) The maximum number of shares that can be awarded under the Escalade, Incorporated 2017 Incentive Plan
is 1,661,598. The plan was approved by stockholders at Escalade’s Annual Meetings of Stockholders in 2017.
(2) Does not include 252,029 shares subject to outstanding, unvested restricted stock unit awards.
28
28
29
29
ITEM 13—CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The information required by Item 407(a) of Regulation S-K is contained in the registrant’s proxy statement
relating to its annual meeting of stockholders to be held on May 10, 2023 under the captions “Election of
Directors” and “Board of Directors, Its Committees, Meetings and Functions” and is incorporated herein by
reference. The information required by Item 404 of Regulation S-K is contained in the registrant’s proxy
statement relating to its annual meeting of stockholders scheduled to be held on May 10, 2023 under the caption
“Certain Relationships and Related Person Transactions” and is incorporated herein by reference.
ITEM 14 — PRINCIPAL ACCOUNTING FEES AND SERVICES
The Company’s independent registered accounting firm is FORVIS, LLP, formerly BKD, LLP; Evansville,
IN; PCAOB ID: 686. The information required by this item is contained in the registrant’s proxy statement
relating to its annual meeting of stockholders scheduled to be held on May 10, 2023 under the caption
“Principal Accounting Firm Fees” and is incorporated herein by reference.
ITEM 15—EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Part IV
(A) Documents filed as a part of this report:
(1) Financial Statements
Reports of Independent Registered Public Accounting Firm
Consolidated financial statements of Escalade, Incorporated and subsidiaries:
Consolidated balance sheets—December 31, 2022 and December 25, 2021
Consolidated statements of operations—fiscal years ended December 31, 2022, December
25, 2021, and December 26, 2020
Consolidated statements of stockholders’ equity—fiscal years ended December 31, 2022,
December 25, 2021, and December 26, 2020
Consolidated statements of cash flows—fiscal years ended December 31, 2022, December
25, 2021, and December 26, 2020
Notes to consolidated financial statements
All other schedules are omitted because of the absence of conditions under which they are
required or because the required information is given in the consolidated financial statements or
notes thereto.
(3) Exhibits
2.1
3.1
3.2
10.1
10.2
10.3
Asset Purchase Agreement dated December 30, 2021, by and between Indian Industries,
Inc. d/b/a Escalade Sports and Life Fitness, LLC (without exhibits and schedules, which
Escalade has determined are not material) (h)
Articles of Incorporation of Escalade, Incorporated (a)
Amended By-Laws of Escalade, Incorporated (c)
Amended and Restated Credit Agreement dated as of January 21, 2022 among Escalade,
Incorporated, Indian Industries, Inc., each of their domestic subsidiaries, and JPMorgan
Chase Bank, N.A., as Administrative Agent (without exhibits and schedules, which
Escalade has determined are not material) (i)
Amended and Restated Pledge and Security Agreement dated as of January 21, 2022 among
Escalade, Incorporated, Indian Industries, Inc., each of their domestic subsidiaries, and
JPMorgan Chase Bank, N.A., as Administrative Agent (without exhibits and schedules,
which Escalade has determined are not material) (i)
First Amendment dated July 18, 2022 to the Amended and Restated Credit Agreement
dated as of January 21, 2022 among Escalade, Incorporated, Indian Industries, Inc., each of
their domestic subsidiaries, and JPMorgan Chase Bank, N.A., as Administrative Agent
(without exhibits and schedules, which Escalade has determined are not material (d)
30
30
10.4
Second Amendment dated October 26,2022 to the Amended and Restated Credit
Agreement dated as of January 21, 2022 among Escalade, Incorporated, Indian Industries,
Inc., each of their domestic subsidiaries, and JPMorgan Chase Bank, N.A., as
Administrative Agent (without exhibits and schedules, which Escalade has determined are
not material) (f)
(4) Executive Compensation Plans and Arrangements
10.5
10.6
10.7
10.8
10.9
Escalade, Incorporated 2017 Incentive Plan, incorporated by reference herein from Annex 1
to the Registrant’s 2017 Definitive Proxy Statement (e)
Form of Stock Option Award Agreement utilized in Stock Option grants to employees
pursuant to the Escalade, Incorporated 2017 Incentive Plan (b)
Form of Stock Option Award Agreement utilized in Stock Option grants to Directors
pursuant to the Escalade, Incorporated 2017 Incentive Plan (b)
Form of Restricted Stock Unit Agreement utilized in Restricted Stock Unit grants to
employees pursuant to the Escalade Incorporated 2017 Incentive Plan (b)
Form of Restricted Stock Unit Agreement utilized in Restricted Stock Unit grants to
Directors pursuant to the Escalade, Incorporated 2017 Incentive Plan (b)
10.10 Offer Letter dated December 20, 2021 by and between Walter P. Glazer, Jr. and Escalade,
Incorporated (g)
Subsidiaries of the Registrant
Consent of FORVIS, LLP
Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification
Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification
Chief Executive Officer Section 1350 Certification
Chief Financial Officer Section 1350 Certification
21
23.1
31.1
31.2
32.1
32.2
101.Cal Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.Def Inline XBRL Taxonomy Extension Definition Linkbase Document
101.Lab Inline XBRL Taxonomy Extension Label Linkbase Document
101.Pre Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.Ins Inline XBRL Instance Document
101.Sch Inline XBRL Taxonomy Extension Schema Document
104
(a) Incorporated by reference from the Company's 2007 First Quarter Report on Form 10-Q
(b) Incorporated by reference from the Company’s Form 10-K for the fiscal year ended December
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
30, 2017 and filed on February 27, 2018
(c) Incorporated by reference from the Company’s 2022 Third Quarter Report on Form 10-Q filed on
October 27, 2022
(d) Incorporated by reference from the Company’s Form 8-K filed on July 21, 2022
(e) Incorporated by reference from the Company’s 2017 Proxy Statement
(f) Incorporated by reference from the Company’s Form 8-K filed on October 27, 2022
(g) Incorporated by reference from the Company’s Form 8-K filed on December 23, 2021
(h) Incorporated by reference from the Company’s Form 8-K filed on January 3, 2022
(i) Incorporated by reference from the Company’s Form 8-K filed on January 24, 2022
ITEM 16—FORM 10-K SUMMARY
None.
31
31
ESCALADE, INCORPORATED AND SUBSIDIARIES
Index to Financial Statements
The following consolidated financial statements of the Registrant and its subsidiaries and Independent
Accountants’ Reports are submitted herewith:
Page
Reports of Independent Registered Public Accounting Firm .................................................................... 33
Consolidated financial statements of Escalade, Incorporated and subsidiaries:
Consolidated balance sheets—December 31, 2022 and December 25, 2021 ...................................... 37
Consolidated statements of operations—fiscal years ended December 31, 2022,
December 25, 2021 and December 26, 2020 ................................................................................... 38
Consolidated statements of stockholders’ equity—fiscal years ended December 31, 2022,
December 25, 2021 and December 26, 2020 ................................................................................... 39
Report of Independent Registered Public Accounting Firm
Audit Committee, Board of Directors and Stockholders
Escalade, Incorporated
Evansville, Indiana
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Escalade, Incorporated as of December 31, 2022,
and December 25, 2021, and the related consolidated statements of operations, stockholders’ equity and cash flows
for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to
as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in
all material respects, the financial position of Escalade, Incorporated as of December 31, 2022, and December 25,
2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December
31, 2022, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), Escalade, Incorporated’s internal control over financial reporting as of December 31, 2022, based
on criteria established in Internal Control––Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated February 24, 2023, expressed an
unqualified opinion thereon.
Basis for Opinion
Consolidated statements of cash flows—fiscal years ended December 31, 2022,
December 25, 2021 and December 26, 2020 ................................................................................... 40
These financial statements are the responsibility of Escalade, Incorporated’s management. Our responsibility is to
express an opinion on Escalade, Incorporated’s financial statements based on our audits.
Notes to consolidated financial statements ............................................................................................ 41
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to
Escalade, Incorporated in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
32
32
33
33
Customer Allowances
The primary procedures we performed to address this critical audit matter included:
Obtaining and reviewing the executed Asset Purchase Agreement documents to gain an understanding of the
underlying terms of the consummated acquisition;
Testing the design and operating effectiveness of controls over the acquisition accounting, including cut-off
procedures performed, asset/liability identification considerations made, and the completeness and accuracy
of the balance sheet acquired and related fair value purchase price allocations made to identified assets and
liabilities assumed;
Obtaining and reviewing all significant outside vendor valuation estimates and challenging management’s
review of the appropriateness of the valuations assessed/allocated to assets acquired and liabilities assumed;
including but not limited to, testing all critical inputs, assumptions applied and valuation models utilized by
the outside vendors;
Utilizing internal valuation specialists to assist with testing the related fair value purchase price allocations
made to identified assets acquired and liabilities assumed;
Testing the goodwill calculation resulting from the acquisition consummated, being the difference between
the total net consideration paid and the fair value of the net assets acquired; and
Reviewing and evaluating the adequacy of the disclosures made in the notes of Escalade Incorporated’s SEC
filings.
/s/ FORVIS, LLP
(Formerly, BKD, LLP)
We have served as Escalade, Incorporated’s auditor since 1977.
Evansville, Indiana
February 24, 2023
As more fully described in Note 16 within the consolidated financial statements, revenue is recognized net of various
sales adjustments, which includes estimated customer allowances for advertising subsidies, volume rebates and
catalog allowances. Escalade, Incorporated reviews such allowances on an ongoing basis and accruals are adjusted
based on the information within the customer agreements. These estimated sales adjustments are included as part of
Net Sales on the consolidated statement of operations. At December 31, 2022, the total accrued for these customer
allowances was $4,504,000 and was presented as part of accrued liabilities on the consolidated balance sheet.
The principal consideration for our determination that performing procedures relating to these accruals is a critical
audit matter was the significant judgment by management to estimate the accruals due to the complexity of the process
involved in developing the accruals. The volume of the customer contracts containing allowance agreements is
significant, some customers are granted multiple types of allowances and contract terms can change
frequently. Management obtains the amount of sales subject to the allowances and the various allowances taken by
customers over time from its accounting system. All of this in turn led to a high degree of auditor judgment and
subjectivity in performing procedures and evaluating management’s process for developing the accruals.
We identified the estimated sales allowances as a critical audit matter. The primary procedures we performed to
address this critical audit matter included:
Testing the design and operating effectiveness of controls, including those related to technology, over the
estimated sales allowances, including data completeness and accuracy and the potential for management bias
in the estimation process;
Testing the completeness and accuracy of the underlying data used to estimate the accrual by agreeing the
sales data used in the calculation to reports that were reconciled to the financial statements, reconciling the
various allowance percentages to signed customer contracts, tracing the allowance amounts used by the
various customers during the year to supporting documentation and comparing the estimated allowances at
the end of each reporting period to actual results that occurred during subsequent reporting periods;
Testing the clerical accuracy of the individual customer allowances computed by management and agreeing
the total of all estimated allowances to the respective accounts on the financial statements.
Assumptions Used in Estimating Goodwill and Intangible Assets Associated with Business Combinations
As described in Note 13 to the consolidated financial statements, Escalade, Incorporated consummated the acquisition
of the assets constituting the Brunswick Billiards business of Life Fitness, LLC during the year ended December 31,
2022, resulting in the expansion of Escalade, Incorporated’s operating product lines and additional goodwill of
$9,631,000 and additional intangible assets of $12,900,000 being recognized on Escalade Incorporated’s consolidated
balance sheet. As part of this acquisition, management assessed that the acquisition qualified as a business combination
and all identifiable assets and liabilities acquired were recorded at fair value as part of the purchase price allocation as
of the acquisition date. The identification and valuation of such acquired assets and assumed liabilities requires
management to exercise significant judgment and consider the use of outside vendors to estimate the fair value
allocations.
We identified the consummated acquisition and the valuation of acquired assets and assumed liabilities a critical audit
matter. Auditing the acquired balance sheet and acquisition related considerations involved a high degree of
subjectivity in evaluating management’s operational assumptions of the newly acquired division, fair value estimates,
purchase price allocations and assessing the appropriateness of outside vendor valuation models.
34
34
35
35
Report of Independent Registered Public Accounting Firm
Audit Committee, Board of Directors and Stockholders
Escalade, Incorporated
Evansville, Indiana
Opinion on the Internal Control Over Financial Reporting
have
audited
Escalade,
We
of
internal
December 31, 2022, based on criteria established in Internal Control––Integrated Framework: (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, Escalade, Incorporated
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on
criteria established in Internal Control–– Integrated Framework: (2013) issued by COSO.
Incorporated’s
reporting
financial
control
over
as
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements of Escalade, Incorporated as of December 31, 2022 and for each of the three
years in the period ended December 31, 2022 and our report dated February 24, 2023, expressed an unqualified opinion on
those financial statements.
Basis for Opinion
Escalade, Incorporated’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Escalade,
Incorporated’s internal control over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Escalade,
Incorporated in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definitions and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of Escalade, Incorporated are being made only in accordance with authorizations of
management and directors of Escalade, Incorporated; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
/s/ FORVIS, LLP
(Formerly, BKD, LLP)
Evansville, Indiana
February 24, 2023
ESCALADE, INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
All Amounts in Thousands Except Share Information
ASSETS
Current Assets:
Cash and cash equivalents
Receivables, less allowances of $492 and $457; respectively
Inventories
Prepaid expenses
Prepaid income tax
TOTAL CURRENT ASSETS
Property, plant and equipment, net
Assets held for sale
Operating lease right-of-use assets
Intangible assets
Goodwill
Other assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
Trade accounts payable
Accrued liabilities
Income tax payable
Current operating lease liabilities
TOTAL CURRENT LIABILITIES
Long-term debt
Deferred income tax liability
Operating lease liabilities
Other liabilities
TOTAL LIABILITIES
Commitments and contingencies
Stockholders' equity:
Preferred stock
December 31,
2022
December 25,
2021
$ 3,967
57,419
121,870
4,942
--
188,198
24,751
2,823
9,100
31,120
42,326
400
$298,718
$ 7,143
9,414
21,320
71
993
38,941
87,738
4,516
8,641
407
140,243
--
$ 4,374
65,991
92,382
7,569
739
171,055
24,936
--
2,210
20,778
32,695
124
$251,798
$ 7,143
15,847
24,385
--
818
48,193
50,396
4,759
1,387
448
105,183
--
Authorized: 1,000,000 shares, no par value, none issued
Common stock
Authorized: 30,000,000 shares, no par value
Issued and outstanding: 2022 —13,594,407 shares, 2021 —13,493,332 shares
Retained earnings
TOTAL STOCKHOLDERS’ EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
See notes to consolidated financial statements.
13,594
144,881
158,475
$298,718
13,493
133,122
146,615
$251,798
36
36
37
37
ESCALADE, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations
ESCALADE, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
All Amounts in Thousands Except Per Share Data
Net Sales
Costs and Expenses
Cost of products sold
Selling, administrative and general expenses
Amortization
Operating Income
Other Income (Expense)
Interest expense
Other income (expense)
Income Before Income Taxes
Provision for Income Taxes
Net Income
Earnings Per Share Data:
Basic earnings per share
Diluted earnings per share
See notes to consolidated financial statements.
December 31,
2022
Years Ended
December 25,
2021
December 26,
2020
$313,757
$313,612
$273,649
240,118
44,765
2,559
26,315
(3,780)
79
22,614
4,625
236,482
43,367
1,867
31,896
(1,510)
163
30,549
6,144
198,822
40,315
1,480
33,032
(250)
140
32,922
6,988
All Amounts in Thousands
Common Stock
Shares
Amount
Retained
Earnings
Total
Balances at December 28, 2019
14,215
$14,215
$111,955
$126,170
Net income
Expense of stock options and restricted stock units
Exercise of stock options
Settlement of restricted stock units
Issuance of restricted stock awards
Dividends declared
Stock issued to directors as compensation
Purchase of stock
10
55
35
10
(406)
10
55
35
10
(406)
25,934
1,016
134
(55)
(35)
(7,466)
87
(6,333)
25,934
1,016
144
--
--
(7,466)
97
(6,739)
Balances at December 26, 2020
13,919
$13,919
$125,237
$139,156
Net income
Expense of stock options and restricted stock units
Exercise of stock options
Settlement of restricted stock units
Dividends declared
Stock issued to directors as compensation
Purchase of stock
10
50
6
(492)
10
50
6
(492)
24,405
902
134
(50)
(7,693)
129
(9,942)
24,405
902
144
--
(7,693)
135
(10,434)
$ 17,989
$ 24,405
$ 25,934
Balances at December 25, 2021
13,493
$13,493
$133,122
$146,615
$ 1.33
$ 1.31
$ 1.78
$ 1.76
$ 1.84
$ 1.82
Net income
Expense of stock options and restricted stock units
Settlement of restricted stock units
Dividends declared
Stock issued to directors as compensation
97
4
97
4
17,989
1,974
(97)
(8,154)
47
17,989
1,974
--
(8,154)
51
Balances at December 31, 2022
13,594
$13,594
$144,881
$158,475
See notes to consolidated financial statements.
38
38
39
39
ESCALADE, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
All Amounts in Thousands
Operating Activities:
Net Income
Reconciling adjustments:
Depreciation and amortization
Provision for doubtful accounts
Stock option and restricted stock unit expense
Deferred income taxes
Loss (gain) on disposals of assets
Changes in
Accounts receivable
Inventories
Prepaids and other assets
Accounts payable and accrued expenses
Net cash provided by operating activities
Investing Activities:
Purchase of property and equipment
Acquisitions
Payment on note payable related to an acquisition
Proceeds from sale of property and equipment
Net cash used in investing activities
Financing Activities:
Dividends paid
Proceeds from issuance of long-term debt
Payments on long-term debt
Proceeds from exercise of stock options
Deferred financing fees
Purchase of stock
Director stock compensation
Net cash provided by financing activities
Increase (decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, beginning of year
Cash and Cash Equivalents, end of year
Supplemental Cash Flows Information
Interest paid
Income taxes paid
Information regarding the Company’s acquisitions in 2022 and 2020 are as follows:
Fair value of assets acquired
Cash paid for assets
Liabilities assumed
See notes to consolidated financial statements.
December 31,
2022
Years Ended
December 25,
2021
December 26,
2020
$ 17,989
$ 24,405
$ 25,934
6,063
108
1,974
(244)
(22)
9,738
(15,847)
3,433
(14,668)
8,524
(2,111)
(35,757)
--
40
(37,828)
(8,154)
197,369
(160,027)
--
(342)
--
51
28,897
(407)
4,374
$3,967
$ 3,867
$ 4,144
$41,496
(35,757)
$ 5,739
4,835
(408)
902
567
(19)
(301)
(19,894)
(4,163)
(4,985)
939
(9,696)
--
--
43
(9,653)
(7,693)
232,065
(204,601)
144
(33)
(10,434)
135
9,583
869
3,505
$4,374
$ 1,433
$ 6,284
$--
--
$ --
4,016
473
1,016
656
(2)
(29,905)
(26,422)
(42)
26,909
2,633
(5,455)
(15,446)
(135)
4
(21,032)
(7,466)
84,044
(53,971)
144
(87)
(6,739)
97
16,022
(2,377)
5,882
$3,505
$ 205
$6,205
$16,277
(15,446)
$ 831
Note 1 —
Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Escalade, Incorporated and its wholly-owned subsidiaries (Escalade, the Company, we, us or our) are engaged in the
manufacture and sale of sporting goods products. The Company is headquartered in Evansville, Indiana and currently
has manufacturing facilities in the United States of America and Mexico. The Company sells products to customers
primarily in North America with minimal sales throughout the remainder of the world.
Principles of Consolidation
The consolidated financial statements include the accounts of Escalade, Incorporated and its wholly-owned
subsidiaries. All material inter-company accounts and transactions have been eliminated.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (GAAP). The books and records of subsidiaries located in foreign countries are
maintained according to generally accepted accounting principles in those countries. Upon consolidation, the
Company evaluates the differences in accounting principles and determines whether adjustments are necessary to
convert the foreign financial statements to the accounting principles upon which the consolidated financial statements
are based. As a result of this evaluation no material adjustments were identified.
Fiscal Year End
Through and including December 31, 2022, the Company’s fiscal year was a 52 or 53 week period ending on the last
Saturday in December. Fiscal year 2022 was 53 weeks long, ending December 31, 2022. Fiscal year 2021 was 52
weeks long, ending December 25, 2021. Fiscal year 2020 was 52 weeks long, ending on December 26, 2020.
On August 10, 2022, Escalade’s Board of Directors approved a change in its fiscal year end from the last Saturday in
December of each year to December 31 of each year. Escalade’s fiscal quarters will end on March 31, June 30, and
September 30. The fiscal year change is effective beginning with Escalade’s 2023 fiscal calendar, which began on
January 1, 2023. Consistent with SEC guidance, no transition report is required in connection with the change in
Escalade’s fiscal year end. Following the filing of this Form 10-K for the year ended December 31, 2022, the new
fiscal year will take effect from January 1, 2023 to December 31, 2023.
Cash and Cash Equivalents
Highly liquid financial instruments with insignificant interest rate risk and with original maturities of three months or
less are classified as cash and cash equivalents. Cash and cash equivalent balances may at times be in excess of
federally insured limits. The Company maintains its cash and cash equivalent balances at high-credit quality financial
institutions. Book overdrafts that result from outstanding checks in excess of our bank balance are reclassified to
accrued liabilities. As of December 31, 2022, the Company reclassed $6.9 million of book overdrafts to accrued
liabilities. As of December 25, 2021, the Company reclassed $4.7 million of book overdrafts to accrued liabilities.
Accounts Receivable
Revenue from the sale of the Company’s products is recognized when obligations under the terms of a contract with
our customer 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. Accounts receivable are stated at the amount billed to customers. Interest and late
charges billed to customers are not material and, because collection is uncertain, are not recognized until collected and
are therefore not included in accounts receivable. The Company provides an allowance for doubtful accounts which
is described in Note 2 – Certain Significant Estimates.
Inventories
Inventory cost is computed on a currently adjusted standard cost basis (which approximates actual cost on a current
average or first-in, first-out basis). Work in process and finished goods inventory are determined to be saleable based
on a demand forecast within a specific time horizon, generally one year or less. Inventory in excess of saleable amounts
is reserved, and the remaining inventory is valued at the lower of cost or net realizable value. This inventory valuation
reserve totaled $1,568 thousand and $748 thousand at fiscal year-end 2022 and 2021, respectively.
40
40
41
41
Inventories, net of the valuation reserve, at fiscal year-ends were as follows:
In Thousands
Raw materials
Work in process
Finished goods
2022
2021
$7,789
3,478
110,603
$121,870
$9,142
3,529
79,711
$92,382
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation and amortization are computed for financial
reporting purposes principally using the straight-line method over the following estimated useful lives: buildings,
20-30 years; leasehold improvements, term of the lease; machinery and equipment, 5-15 years; and tooling, dies
and molds, 2-5 years. Property, plant and equipment consist of the following:
In Thousands
2022
2021
Land
Buildings and leasehold improvements
Machinery and equipment
Total cost
Accumulated depreciation and amortization
$ 1,306
27,406
27,497
56,209
(31,458)
$ 24,751
$ 2,255
24,175
31,853
58,283
(33,347)
$ 24,936
The Company evaluates the recoverability of certain long-lived assets whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Estimates of future cash flows used to test recoverability
of long-lived assets include separately identifiable undiscounted cash flows expected to arise from the use and
eventual disposition of the assets. Where estimated future cash flows are less than the carrying value of the assets,
impairment losses are recognized based on the amount by which the carrying value exceeds the fair value of the
assets. No asset impairment was recognized during the years ended 2022, 2021, or 2020.
We classify assets as held for sale when our management approves and commits to a formal plan of sale that is
probable of being completed within one (1) year. Assets designated as held for sale are recorded at the lower of
their current carrying value or their fair market value, less costs to sell, beginning in the period in which the assets
meet the criteria to be classified as held for sale.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over fair value of net tangible and identifiable intangible assets
of acquired businesses. Intangible assets consist of patents, consulting agreements, non-compete agreements, customer
lists, developed technology, license agreements, and trademarks. Goodwill is deemed to have an indefinite life and is
not amortized, but is subject to impairment testing annually in accordance with guidance included in FASB ASC 350,
Intangibles – Goodwill and Other. Other intangible assets are amortized using the straight-line method over the
following lives: license agreements, 17 years; developed technology, 5 years; trademarks, 20 years to indefinite life;
consulting agreements, the life of the agreement; customer lists, 3 to 15 years; non-compete agreements, the lesser of
the term or 5 years; and patents, the lesser of the remaining life or 5 to 15 years.
The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate
the carrying value of goodwill may not be recoverable, in accordance with guidance in FASB ASC 350, Intangibles
– Goodwill and Other. A qualitative assessment is first performed to determine if the fair value of the reporting unit
is "more likely than not" less than the carrying value. If so, we proceed to a quantitative assessment, in which the fair
value of the reporting unit is compared to its carrying value. If the carrying value of goodwill exceeds the fair value,
an impairment charge to current operations is recorded to reduce the carrying value to the fair value. The results of
the qualitative impairment assessment of the Escalade Sports reporting unit indicated that it was not “more likely
than not” that the fair value of the reporting unit was less than the carrying value as of December 31, 2022 and
December 25, 2021.
42
42
Employee Incentive Plan
During 2017, the Company approved an incentive plan explained in Note 9. The Company accounts for this plan
under the recognition and measurement principles of FASB ASC 718, Equity Based Payments.
Foreign Currency
The functional currency for the foreign operations of Escalade is the U.S. dollar. Gains or losses resulting from
foreign currency transactions are included in selling, general and administrative expense in the Consolidated
Statements of Operations and were insignificant in fiscal years 2022, 2021, and 2020.
Cost of Products Sold
Cost of products sold is comprised of those costs directly associated with or allocated to the products sold and
include materials, labor and factory overhead.
Provision for Income Taxes
Income tax in the consolidated statement of operations includes deferred income tax provisions or benefits for all
significant temporary differences in recognizing income and expenses for financial reporting and income tax purposes.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax asset will not be realized.
The Company accounts for uncertainty in tax positions by recognizing in its financial statements the impact of a tax
position only if that position is more likely than not of being sustained.
Research and Development
Research and development costs are charged to expense as incurred. Research and development costs incurred during
2022, 2021 and 2020 were approximately $2.7 million, $2.0 million, and $1.5 million, respectively.
New Accounting Pronouncements and Changes in Accounting Principles
New Accounting Standards to be Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments. This amendment requires the measurement and recognition of expected
credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment
model with an expected loss model which requires the use of forward-looking information to calculate credit loss
estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to
available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in
the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. The
amendments are effective in fiscal years beginning after December 15, 2020, and interim periods within those fiscal
years. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326),
Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. This amendment delays the
effective dates of specific ASUs, including ASU 2016-13 by one year. Amendments in ASU 2016-13 are effective
in fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company will
adopt this ASU within the annual reporting period ending December 31, 2023. The Company is currently assessing
the impact of adopting this standard, but based upon its preliminary assessment, does not expect the adoption of
this guidance to have a material impact on its consolidated financial statements.
Note 2 —
Certain Significant Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities; the
disclosure of contingent assets and liabilities at the date of the consolidated financial statements; and the reported
amounts of revenues and expenses during the reporting period. These estimates and judgments are evaluated on an
ongoing basis and are based on experience; current and expected future conditions; third party evaluations; and various
other assumptions believed reasonable under the circumstances. The results of these estimates form the basis for
making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting
treatment with respect to commitments and liabilities. Actual results may differ from the estimates and assumptions
used in the financial statements and related notes.
43
43
Listed below are certain significant estimates and assumptions related to the preparation of the consolidated financial
statements:
Delinquent receivables are reserved or written off based on individual credit evaluation and specific circumstances of
the customer. Changes in allowance for doubtful accounts were as follows:
Goodwill and Intangible Assets
The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate
the carrying value of goodwill may not be recoverable, in accordance with guidance in FASB ASC 350, Intangibles
– Goodwill and Other. A qualitative assessment is first performed to determine if the fair value of the reporting unit
is "more likely than not" less than the carrying value. If so, we proceed to a quantitative assessment, in which the fair
value of the reporting unit is compared to its carrying value. If the carrying value of goodwill exceeds the fair value,
an impairment charge to current operations is recorded to reduce the carrying value to the fair value.
Other intangible assets are amortized using the straight-line method over the following lives: license agreements, 17
years; developed technology, 5 years; trademarks, 20 years to indefinite life; consulting agreements, the life of the
agreement; customer lists, 3 to 15 years; non-compete agreements, the lesser of the term or 5 years; and patents, the
lesser of the remaining life or 5 to 15 years.
Indefinite-lived intangible assets are reviewed for impairment annually, or whenever events or changes in
circumstances indicate the carrying amount of an intangible asset may not be recoverable. There are inherent
assumptions and judgments required in the analysis of goodwill and intangible impairment.
Product Warranty
The Company provides limited warranties on certain of its products, for varying periods. Generally, the warranty
periods range from 30 days to one year. However, some products carry extended warranties of three-year, five-year,
seven-year, ten-year, fifteen-year, and lifetime warranties. The Company records 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. Changes in product warranty were as follows:
In Thousands
2022
2021
2020
Beginning balance
Additions (Reductions)
Deductions
Ending balance
$ 457
108
(73)
$ 492
$ 896
(408)
(31)
$ 457
$ 483
473
(60)
$ 896
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. Changes in customer allowances for advertising subsidies,
volume rebates and catalog allowances were as follows:
In Thousands
2022
2021
2020
Beginning balance
Additions
Deductions
Ending balance
Note 3 —
Accrued Liabilities
Accrued liabilities consist of the following:
$ 2,340
11,627
(12,326)
$ 1,641
$ 2,296
12,930
(12,886)
$ 2,340
$ 1,292
11,940
(10,936)
$ 2,296
In Thousands
2022
2021
2020
In Thousands
2022
2021
Beginning balance
Additions
Deductions
Ending balance
$ 1,119
2,472
(2,578)
$ 1,013
$ 962
2,487
(2,330)
$ 1,119
$ 688
1,648
(1,374)
$ 962
Inventory Valuation Reserves
The Company evaluates inventory for obsolescence and excess quantities based on demand forecasts based on
specified time frames; usually one year. The demand forecast is based on historical usage, sales forecasts and current
as well as anticipated market conditions. All amounts in excess of the demand forecast are deemed to be potentially
excess or obsolete and a reserve is established based on the anticipated net realizable value. Changes in inventory
valuation reserves were as follows:
In Thousands
2022
2021
2020
Beginning balance
Additions
Deductions
Ending balance
$ 748
1,083
(263)
$ 1,568
$ 697
446
(395)
$ 748
$ 786
831
(920)
$ 697
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon a review of outstanding receivables, historical
collection information and existing economic conditions. Accounts receivable are ordinarily due between 30 and 60
days after the issuance of the invoice. Accounts are considered delinquent when more than 90 days past due.
44
44
Employee compensation
Customer co-op and volume allowances
Customer return accruals and other allowances
Other accrued items
$ 3,647
1,641
4,225
11,807
$ 21,320
$ 5,573
2,340
6,435
10,037
$ 24,385
Note 4 —
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 9 years. As of December 31, 2022, 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.
45
45
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 when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments
is recognized on a straight-line basis over the lease term. Components of lease expense and other information is as
follows:
All Amounts in Thousands
Lease Expense
Operating Lease Cost
Short-term Lease Cost
Variable Lease Cost
Total Operating Lease Cost
Operating Lease – Operating Cash Flows
New ROU Assets – Operating Leases (non-cash)
Twelve Months Ended
Twelve Months Ended
December 31, 2022
December 25, 2021
$1,481
2,587
502
$4,570
$860
$8,084
$1,489
3,019
378
$4,886
$1,347
$2,347
Other information about lease amounts recognized in our consolidated financial statements is summarized as
follows:
Weighted Average Remaining Lease Term – Operating Leases
Weighted Average Discount Rate – Operating Leases
Period Ended
December 31, 2022
8.98 years
5.06%
Period Ended December
25, 2021
3.97 years
5.00%
Future minimum lease payments under non-cancellable leases as of December 31, 2022 were as follows:
All Amounts in Thousands
Year 1
Year 2
Year 3
Year 4
Year 5
Thereafter
Total future minimum lease payments
Less imputed interest
Total
Reported as of December 31, 2022
Current operating lease liabilities
Long-term operating lease liabilities
Total
$1,454
1,402
1,367
1,323
1,237
5,270
12,053
(2,419)
$9,634
993
8,641
$9,634
Note 5 —
Acquired Intangible Assets and Goodwill
The carrying basis and accumulated amortization of recognized intangible assets are summarized in the following
table:
In Thousands
Patents
Non-compete agreements
Customer list
Trademarks
Developed technology
License agreements
2022
2021
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
24,715
2,749
22,017
18,636
475
700
69,292
24,270
2,749
9,783
802
396
172
38,172
24,715
2,749
18,017
9,736
475
700
56,392
24,068
2,749
8,100
266
301
130
35,614
Amortization expense was $2.6 million, $1.9 million and $1.5 million for 2022, 2021 and 2020, respectively.
Estimated future amortization expense is summarized in the following table:
All Amounts in Thousands
2023
2024
2025
2026
2027
Thereafter
Subtotal
Indefinite-lived intangible asset balance
Total
$2,480
2,356
2,307
2,259
2,173
11,761
23,336
7,784
$31,120
All goodwill is allocated to the operating segment of the business. The changes in the carrying amount of goodwill
were:
In Thousands
Sporting Goods
Balance at December 26, 2020
Acquisition
Balance at December 25, 2021
Acquisition
Balance at December 31, 2022
$32,695
--
$32,695
9,631
$42,326
The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate
the carrying value of goodwill may not be recoverable, in accordance with guidance in FASB ASC 350, Intangibles –
Goodwill and Other. A qualitative assessment is first performed to determine if the fair value of the reporting unit is
“more likely than not” less than the carrying value. If so, we proceed to a quantitative assessment, in which the fair
value of the reporting unit is compared to its carrying value. If the carrying value of goodwill exceeds the fair value,
an impairment charge to current operations is recorded to reduce the carrying value to the fair value.
46
46
47
47
Note 6 —
Borrowings
On January 21, 2019, the Company entered into an Amended and Restated Credit Agreement (“2019 Restated Credit
Agreement”) among the Company and its wholly owned subsidiary, Indian Industries, Inc. (“Indian”), each of their
domestic subsidiaries, and JPMorgan Chase Bank, N.A., as Administrative Agent and as Lender (the “Lender”). Under
the terms of the 2019 Restated Credit Agreement, the Lender made available to the Company a senior revolving credit
facility with maximum availability of $50.0 million having a maturity date of January 31, 2022. The 2019 Restated
Credit Agreement also allowed Escalade to request the issuance of letters of credit of up to $5.0 million.
On December 14, 2020, the Company entered into the Third Amendment dated as of December 14, 2020 (the “Third
Amendment”) to the 2019 Restated Credit Agreement. Under the terms of the Third Amendment, the maximum
availability under the senior revolving credit facility increased to $75.0 million and the maturity date was extended to
December 14, 2023. Other significant changes reflected in the Third Amendment included: increases in borrowing
base availability if the Company’s funded debt to EBITDA ratio is less than 1.75 to 1:00; increasing to $30.0 million
the total consideration that the Company may use for acquisitions without obtaining the Lender’s consent, as long as
no event of default exists; resetting the maximum authorized stock repurchases to $15.0 million for the period
commencing upon entry into the Third Amendment; increasing the interest rate on borrowings by twenty five basis
points; increasing the unused facility fee by five basis points; and adding specific provisions and procedures for
replacement of LIBOR if and when LIBOR would no longer be the benchmark for determining interest rates.
On July 7, 2021, the Company entered into the Fourth Amendment dated as of July 7, 2021 (the “Fourth Amendment”)
to the 2019 Restated Credit Agreement. Under the terms of the Fourth Amendment, the Lender extended a $50.0
million term loan to the Company and reduced the maximum availability under the senior revolving credit facility
from $75.0 million to $50.0 million. The proceeds of the term loan were used to pay down the Company’s then-
outstanding indebtedness under the revolving credit facility, with the balance of the term loan proceeds being available
for general working capital purposes. The maturity date of the term loan was July 7, 2026 and the maturity date of the
revolving credit facility likewise was extended to July 7, 2026.
On January 21, 2022, the Company entered into an Amended and Restated Credit Agreement (“2022 Restated
Credit Agreement”) with its issuing bank, JP Morgan Chase Bank, N.A. (“Chase”), and the other lenders identified
in the 2022 Restated Credit Agreement (collectively, the “Lenders”). Under the terms of the 2022 Restated Credit
Agreement, Old National Bank was added as a Lender. The Lenders made available to the Company a senior
revolving credit facility with increased maximum availability of $65.0 million (the “Revolving Facility”), up from
$50.0 million, plus an accordion feature that would allow borrowings up to $90.0 million under the Revolving
Facility subject to certain terms and conditions. The maturity date of the revolving credit facility was extended to
January 21, 2027. The Company may prepay the Revolving Facility, in whole or in part, and reborrow prior to the
revolving loan maturity date. The Restated Credit Agreement further extended the maturity date for the term loan
facility to January 21, 2027.
In addition to the increased borrowing amount and extended maturity date, the 2022 Restated Credit Agreement
provided a $7.5 million swingline commitment by Chase, replaced LIBOR with the replacement benchmark secured
overnight financing rate, and adjusted certain financial covenants relating to the fixed charge coverage ratio.
On July 18, 2022, the Company entered into the First Amendment (the “First Amendment”) to the 2022 Restated
Credit Agreement.
Under the terms of the First Amendment, the Lenders increased the maximum availability under the senior revolving
credit facility from $65.0 million to $75.0 million pursuant to the accordion feature in the 2022 Restated Credit
Agreement. The First Amendment also adjusted the funded debt to EBITDA ratio financial covenant to 3:00 to 1:00
as of the end of the Company’s third and fourth fiscal quarters of 2022.
On October 26, 2022, the Company entered into the Second Amendment (the “Second Amendment”) to the 2022
Restated Credit Agreement.
Under the terms of the Second Amendment, the Lenders increased the maximum availability under the senior
revolving credit facility from $75.0 million to $90.0 million pursuant to the accordion feature in the 2022 Restated
Credit Agreement. The Second Amendment adjusted the funded debt to EBITDA ratio financial covenant to 3:25
to 1:00 as of the end of the Company’s third and fourth fiscal quarters of 2022 and 3:00 to 1:00 as of the end of the
Company’s first fiscal quarter of 2023. The Second Amendment also modified the EBITDA definition to permit
add-backs of a) up to $2.0 million for disposition related expenses; and b) up to $2.0 million for unusual or non-
recurring expenses which are incurred prior to the end of fiscal year 2023 and which are subject to the approval of
the Administrative Agent.
Each loan will bear interest based on the applicable SOFR rate for the interest period in effect plus the Applicable
Rate. From October 26, 2022 up to and including the fiscal quarter ending June 30, 2023, the applicable rate per
annum is set forth below in Category 1. After the fiscal quarter ending June 30, 2023, the Applicable Rate shall be
determined as of the end of each quarter based upon Escalade’s Funded Debt to Adjusted Ratio as of the most recent
determination date:
Funded Debt to
EBITDA Ratio
Category 1
Greater than or equal to 3.00 to 1.0
Category 2
Greater than or equal to 2.50 to 1.0
but less than 3.00 to 1.0
Category 3
Greater than or equal to 1.50 to 1.0
but less than 2.50 to 1.0
Category 4
Less than 1.50 to 1.0
Revolving
Commitment
ABR Spread
Revolving
Commitment
Term Benchmark
Spread
Letter of
Credit
Fee
Commitment
Fee Rate
0.75%
2.50%
2.50%
0.35%
0.25%
2.00%
2.00%
0.30%
-0-
1.75%
1.75%
0.25%
(0.25%)
1.50%
1.50%
0.20%
The Applicable Rate is determined as of the end of each quarter based upon the Company’s annual or quarterly
consolidated financial statements and is effective during the period commencing the date of delivery to the agent.
The Company’s indebtedness under the 2022 Restated Credit Agreement continues to be collateralized by liens on
all of the present and future equity of each of the Company’s and Indian’s domestic subsidiaries and substantially
all of the assets of the Company (excluding real estate). Each direct and indirect domestic subsidiary of the Company
and Indian has secured its guaranty of indebtedness incurred under the revolving facility with a first priority security
interest and lien on all of such subsidiary’s assets. The obligations, guarantees, liens and other interests granted by
the Company, Indian, and their domestic subsidiaries continues in full force and effect.
48
48
49
49
Long-Term Debt
Long-term debt at fiscal year-ends was as follows:
In Thousands
2022
2021
Senior secured revolving credit facility of $90.0 million with a
maturity of January 21, 2027. The interest rate at December 31,
2022 was 6.92% and 3.00% at December 25, 2021.
Term loan of $50.0 million with a maturity date of January 21, 2027.
The interest rate at December 31, 2022 and December 25, 2021,
was 2.97%.
Current portion of long-term debt
$ 55,000
$ 10,515
39,881
47,024
94,881
(7,143)
$ 87,738
57,539
(7,143)
$ 50,396
The Company makes monthly principal payments under the Term loan of $595 thousand.
Note 7 —
Earnings Per Share
The shares used in the computation of the Company’s basic and diluted earnings per common share are as follows:
In Thousands
2022
2021
2020
Weighted average common shares outstanding
Dilutive effect of stock options and restricted stock units
Weighted average common shares outstanding, assuming dilution
13,572
117
13,689
13,747
119
13,866
14,096
129
14,225
Number of anti-dilutive stock options and unvested restricted stock units
--
--
58
Weighted average common shares outstanding, assuming dilution, includes the incremental shares that would be
issued upon the assumed exercise of stock options outstanding.
Note 8 —
Employee Benefit Plans
The Company has an employee profit-sharing salary reduction plan, pursuant to the provisions of Section 401(k) of
the Internal Revenue Code, for all employees. The Company’s contribution is a matching percentage of the employee
contribution as determined by the Board of Directors annually. The Company’s expense for the plan was $1,179
thousand, $1,041 thousand and $841 thousand for 2022, 2021 and 2020, respectively.
Note 9 —
Stock Compensation Plans
In May 2017, Shareholders approved the Escalade, Incorporated 2017 Incentive Plan (2017 Incentive Plan), which
is an incentive plan for key employees, directors and consultants with various equity-based incentives as described
in the plan document. The 2017 Incentive Plan is a replacement for the 2007 Incentive Plan, which expired at the
end of April 2017. All options issued and outstanding under the expired plans will remain in effect until exercised,
expired or forfeited.
50
50
The 2017 Incentive Plan is administered by the Board of Directors or a committee thereof, which is authorized to
determine, among other things, the key employees, directors or consultants who will receive awards under the plan,
the amount and type of award, exercise prices or performance criteria, if applicable, and vesting schedules. Under
the original terms of the plan and subject to various restrictions contained in the plan document, the total number
of shares of common stock which may be issued pursuant to awards under the Plan may not exceed 1,661,598.
Restricted Stock Awards
During 2022, and pursuant to the 2017 Incentive Plan, in lieu of cash payments of director fees, the Company
awarded to certain directors 3,886 shares of common stock. In 2022, the Company awarded 20,000 restricted stock
units to directors and 196,254 restricted stock units 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 2022 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 is still employed by the Company on the vesting date. The Company has elected to
account for forfeitures when they actually occur.
A summary of restricted stock awards activity is as follows:
Non-vested stock units as of December 26, 2020
Granted
Vested
Forfeited
Non-vested stock units as of December 25, 2021
Granted
Vested
Forfeited
Non-vested stock units as of December 31, 2022
Number of
Shares
Weighted
Average Grant
Date Fair Value
244,076
50,615
(84,887)
(55,684)
154,120
216,254
(97,189)
(21,156)
252,029
$8.98
20.74
8.98
7.99
$13.19
14.15
12.16
14.10
$14.33
When vesting is dependent on certain market criteria, the fair value of restricted stock units is determined by the
use of Monte Carlo techniques. The market price of the Company’s stock on the grant date is used to value
restricted stock units where vesting is not contingent on market criteria. In 2022, 2021, and 2020 the Company
recognized $1,974 thousand, $902 thousand, and $1,011 thousand respectively in compensation expense related to
restricted stock units and as of December 31, 2022 and December 25, 2021, there was $1,415 thousand and $629
thousand respectively, of unrecognized compensation expense related to restricted stock units.
Stock Options
Total compensation expense recorded in the statements of operations for 2022, 2021 and 2020 relating to stock
options was zero, zero and $5 thousand, respectively. No stock options were awarded during 2022, 2021 or 2020.
The following table summarizes option activity for each of the three years ended 2022:
Incentive Stock Options
Granted
Outstanding
Director Stock Options
Granted
Outstanding
2022
2021
2020
--
--
--
--
--
10,000
--
--
--
--
--
--
51
51
The following table summarizes stock option transactions for the three years ended 2022:
2022
Shares
Option Price
2021
Shares Option Price
Shares
2020
Option Price
Outstanding at beginning of year
Issued during year
Canceled or expired
Exercised during year
Outstanding at end of year
Exercisable at end of year
--
--
--
--
--
--
--
--
--
--
--
Weighted-average fair value of
options granted during the year
--
$14.39
--
--
$14.39
--
10,000
--
--
(10,000)
--
--
--
20,000
--
--
(10,000)
10,000
10,000
--
$14.39
--
--
$14.39
$14.39
The total intrinsic value of options exercised was zero, zero and $73 thousand 2022, 2021 and 2020, respectively.
There were no stock options outstanding at December 31, 2022.
Note 10 — Provision for Taxes
Income before taxes and the provision for taxes consisted of the following:
In Thousands
Income before taxes:
Provision (benefit) for taxes:
Current
Federal
State
Deferred
Federal
State
2022
2021
2020
$ 22,614
$ 30,549
$ 32,922
$ 4,149
720
4,869
(502)
258
(244)
$ 4,625
$ 4,819
758
5,577
$ 5,479
854
6,333
408
159
567
$ 6,144
665
(10)
655
$ 6,988
The provision for income taxes was computed based on financial statement income. A reconciliation of the
provision for income taxes to the amount computed using the statutory rate follows:
In Thousands
Income tax at statutory rate
Increase (decrease) in income tax resulting from
State tax expense, net of federal effect
Federal true-ups
Federal tax credits
Captive insurance earnings
Incentive stock options
Other
Recorded provision for income taxes
2022
2021
2020
$ 4,749
$ 6,415
$ 6,914
773
(49)
(413)
(478)
(18)
61
$ 4,625
724
(38)
(251)
(456)
(214)
(36)
$ 6,144
668
(103)
(114)
(443)
(4)
70
$ 6,988
The provision for income taxes was computed based on financial statement income. In accordance with FASB ASC
740, the Company has an uncertain tax position as of and for the years ended December 31, 2022 and December
25, 2021. Interest costs and penalties related to income taxes are classified as interest expense and selling, general
and administrative costs, respectively in the Company’s financial statements. The Company and its subsidiaries file
income tax returns in the U.S. federal jurisdiction, and multiple state and foreign jurisdictions. The Company is
subject to future examinations by federal, state and other tax authorities for all years after 2018.
The Company has state, net of federal benefit, research tax credit carryforwards of $351 thousand as of December
31, 2022. The state research tax credit carryforwards begin to expire in 2024. A valuation allowance has been
established in the amount of $351 thousand as of December 31, 2022 related to the state tax credit carryforwards,
leaving an ending deferred, net of federal benefit, in the amount of zero. The increase in the valuation allowance
relates to the decrease in the projected tax liability which would be offset by the credit carryforward. The valuation
allowance is based on the historical results and estimated future results of the Company, as it is the judgment of
management not all of these tax carryforward attributes will be realized before they begin to expire. In addition, the
Company has foreign tax credit carryforwards of $323 thousand, as of December 31, 2022.
At December 31, 2022, the Company had domestic federal income taxes payable of $158 thousand, domestic state
income taxes receivable of $87 thousand, and transition tax payable of $387 thousand recorded. At December 25,
2021, the Company had domestic federal income taxes receivable of $631 thousand, domestic state income taxes
receivable of $108 thousand, and transition tax payable of $387 thousand recorded.
The components of the net deferred tax liabilities are as follows:
In Thousands
Assets
Valuation reserves
Stock based compensation
Federal and state credits
Lease obligation
Other
Capitalized research costs
Total assets
Liabilities
Property and equipment
Goodwill and intangible assets
Lease – right of use asset
Prepaid insurance
Total liabilities
Valuation Allowance
Beginning balance
(Increase) Decrease during period
Ending balance
2022
2021
$ 1,167
389
674
2,252
4
605
5,091
(1,502)
(5,347)
(2,127)
(280)
(9,256)
$ 1,248
329
339
515
34
--
2,465
(1,474)
(4,973)
(517)
(237)
(7,201)
(23)
(328)
(351)
$ (4,516)
(27)
4
(23)
$ (4,759)
52
52
53
53
The following table reconciles the total amounts of unrecognized tax benefits:
Note 11 — Operating Segment and Geographic Information
In Thousands
2022
2021
2020
The following table presents certain operating segment information.
Balance at beginning of year
Increases related to prior year tax positions
Decreases related to prior year tax positions
Increases related to current year tax positions
Settlements
Closure of tax years
Balance at end of year
$ 61
-
-
-
-
(41)
$ 20
$ 61
-
-
-
-
-
$ 61
$ --
-
-
61
-
-
$ 61
The total amount of unrecognized tax benefits, net of federal income tax benefits, of $16 thousand at December
31, 2022, and $48 thousand at December 25, 2021, that if recognized, would affect the effective tax rate on
income from continuing operations.
The Company had no accrued interest and penalties related to taxes, recognized as a liability, as of December 31,
2022.
The Company has assessed its risk associated with all tax return positions and believes its tax reserve estimate
reflects its best estimate of the deductions and positions it will be able to sustain, or it may be willing to concede
as part of a settlement. At this time, the Company does not anticipate any change in its tax reserves in the next
twelve months. The Company will continue to monitor the progress and conclusion of all audits and will adjust its
estimated liability as necessary.
In Thousands
2022
2021
2020
Sporting Goods
Net revenue
Operating income
Interest expense
Provision for taxes
Net income
Identifiable assets
Depreciation & amortization
Capital expenditures
All Other
Net revenue
Operating income
Interest expense (income)
Provision (benefit) for taxes
Net income
Identifiable assets
Depreciation & amortization
Capital expenditures
Total
Net revenue
Operating income
Interest expense
Provision for taxes
Net income
Identifiable assets
Depreciation & amortization
Capital expenditures
$ 313,757
25,925
3,780
6,106
16,117
286,417
6,063
2,111
--
390
--
(1,481)
1,872
12,301
--
--
313,757
26,315
3,780
4,625
17,989
298,718
6,063
2,111
$ 313,612
31,534
1,510
8,295
21,892
241,547
4,835
9,696
$ 273,649
32,685
250
8,951
23,625
211,253
4,016
5,455
--
362
--
(2,151)
2,513
10,251
--
--
313,612
31,896
1,510
6,144
24,405
251,798
4,835
9,696
--
347
--
(1,963)
2,309
9,452
--
--
273,649
33,032
250
6,988
25,934
220,705
4,016
5,455
Each operating segment is individually managed and has separate financial results that are reviewed by the
Company’s management. There were no changes to the composition of segments in 2022. The accounting policies
of the reportable segments are the same as those described in the summary of significant accounting policies.
The Sporting Goods segment consists of home entertainment products such as table tennis tables and accessories;
basketball goals; pickleball; pool tables and accessories; outdoor playsets; water sports; soccer and hockey tables;
archery equipment and accessories; and fitness, arcade and darting products. Customers include retailers, dealers and
wholesalers located throughout North America, Europe and the rest of the world.
All Other consist of general and administrative expenses not specifically related to the operating business segments.
Interest expense is allocated to operating segments based on working capital usage and the provision for taxes is
allocated based on a combined federal and state statutory rate of 27.5% adjusted for actual taxes on foreign income.
Permanent tax adjustments and timing differences are included in the all other segment.
Identifiable assets are principally those assets used in each segment. The assets in the all other segment are principally
cash and cash equivalents; and prepaid assets.
54
54
55
55
The Company had net assets of $14.8 million and $15.8 million located in Mexico as of December 31, 2022 and
December 25, 2021, respectively.
Note 13 — Acquisitions
During 2022, 2021 and 2020, the Company had one customer that accounted for approximately 23%, 21% and
23%, respectively, of the Company’s revenues. During 2022, 2021 and 2020 the Company had another customer
which accounted for approximately 12%, 11% and 13%, respectively, of the Company’s revenues.
As of December 31, 2022, the Company had approximately 28% of its total accounts receivable with one customer.
As of December 25, 2021, the Company had approximately 24%, 17% and 10% of its total accounts receivable with
that same customer and two other customers, respectively.
As of December 31, 2022, approximately 31 employees of the Company's labor force were covered by a collective
bargaining agreement that expires on January 31, 2025.
Raw materials for Escalade’s various product lines consist of wood, tempered glass, particle board, standard grades
of steel and steel tubing, aluminum, engineering plastics, fiberglass and packaging materials. Escalade relies upon
domestic, Mexico, Brazil, and Asian suppliers for these materials and upon various Asian manufacturers for many
of its products.
Net sales are attributed to country based on location of customer. Net sales by geographic region/country were as
follows:
In Thousands
2022
2021
2020
North America
Europe
Other
$ 307,318
3,036
3,403
$ 313,757
$ 309,211
2,153
2,248
$ 313,612
$ 270,173
1,555
1,921
$ 273,649
Note 12 — Summary of Quarterly Results
In thousands, except per share data (unaudited)
March 19
July 9
October 1
December 31
2022
Net Sales
Operating Income
Net income
Basic Earnings Per Share Data:
Diluted Earnings Per Share Data:
$ 72,380
9,023
6,654
$ 0.49
$ 0.49
$ 94,337
8,189
5,673
$ 0.42
$ 0.42
$ 74,904
4,220
2,958
$ 0.22
$ 0.22
$ 72,136
4,883
2,704
$ 0.20
$ 0.20
In thousands, except per share data (unaudited)
March 20
July 10
October 2
December 25
2021
Net Sales
Operating Income
Net income
Basic Earnings Per Share Data:
Diluted Earnings Per Share Data:
$ 59,191
7,129
5,442
$ 0.39
$ 0.39
$ 99,679
10,686
8,126
$ 0.59
$ 0.58
$ 81,298
7,672
5,966
$ 0.44
$ 0.43
$ 73,444
6,409
4,871
$ 0.36
$ 0.36
56
56
All of the Company’s acquisitions have been accounted for using the purchase method of accounting.
2022
On January 21, 2022, the Company completed its acquisition of the assets constituting the Brunswick Billiards
business of Life Fitness, LLC. The purchase price of the acquisition was $35.8 million. Acquisition-related costs of
$134 thousand were incurred during the year ended December 31, 2022. The acquisition was funded by cash and
the Company’s revolving credit facility. The Company allocated the purchase price to the assets acquired, net of
the liabilities assumed, based on their estimated fair value as of the date of the acquisition. The excess of the
purchase price over the fair value of the assets acquired, net of the fair value of liabilities assumed, was recorded as
goodwill. The recorded goodwill is deductible for tax purposes. The allocation of the purchase price, including
values assigned to assets, liabilities and the amount of goodwill and intangible assets are represented in the table
below:
In thousands
Assets acquired and liabilities assumed:
Accounts receivable, net
Inventories, net
Fixed assets, including building and land
Goodwill
Intangible assets
Accounts payable
Other liabilities
$ 1,275
13,641
4,049
9,631
12,900
(3,193)
(2,546)
$35,757
2020
In October 2020, the Company acquired the assets of the billiard table, game room, and recreational product lines
of American Heritage Billiards, including the related intellectual property. In December 2020, the Company
acquired substantially all of the business and assets of Revel Match LLC, dba RAVE Sports, a brand known for its
innovative and high-quality water recreation products. Total consideration paid for the acquisitions was $15.4
million. The consideration paid by the company for these acquisitions was allocated to the assets acquired, net of
the liabilities assumed, based upon their estimated fair values as of the date of the acquisition. The excess of the
purchase price over the estimated fair value of the assets acquired, net of the estimated fair value of the liabilities
assumed, was recorded as goodwill. The recorded goodwill is deductible for tax purposes. The allocation of the
purchase price, including values assigned to assets, liabilities and the amount of goodwill and intangible assets are
represented in the table below.
In thousands
Assets acquired and liabilities assumed:
Accounts receivable, net
Inventories, net
Other assets
Goodwill
Intangible assets
Accounts payable
Other liabilities
$ 399
3,797
936
5,946
5,277
(576)
(333)
$15,446
57
57
Note 14 — Commitments and Contingencies
The Company is involved in litigation arising in the normal course of its business. The Company does not believe
that the disposition or ultimate resolution of existing claims or lawsuits will have a material adverse effect on the
business or financial condition of the Company. The Company has entered into various agreements whereby it is
required to make royalty and license payments. At December 31, 2022, the Company had future estimated minimum
non-cancelable royalty and license payments as follows:
In Thousands
2023
2024
2025
2026
2027
Thereafter
Amount
$ 898
566
579
599
620
1,305
$ 4,567
Note 15 — Fair Values of Financial Instruments
The following methods were used to estimate the fair value of all financial instruments recognized in the
accompanying balance sheets at amounts other than fair values.
Cash and Cash Equivalents and Time Deposits
Fair values of cash and cash equivalents approximate cost due to the short period of time to maturity.
Notes Payable and Long-term Debt
The Company believes the carrying value of long-term debt, including the current portion of long-term debt,
adequately reflects the fair value of these instruments.
The following table presents estimated fair values of the Company’s financial instruments in accordance with FASB
ASC 825 at December 31, 2022 and December 25, 2021.
2022
In Thousands
Financial assets
Fair Value Measurements Using
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Fair Value
Cash and cash equivalents
$ 3,967
$ 3,967
$ --
$ --
Financial liabilities
Current portion of long-term debt
Long-term debt
$7,143
$87,738
$ --
$ --
$ 7,143
$87,738
$ --
$ --
2021
In Thousands
Financial assets
Fair Value Measurements Using
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Fair Value
Cash and cash equivalents
$ 4,374
$ 4,374
$ --
$ --
Financial liabilities
Current portion of long-term debt
Long-term debt
$7,143
$50,396
$ --
$ --
$ 7,143
$50,396
$ --
$ --
Note 16 — Revenue from Contracts with Customers
Revenue Recognition – Revenue is recognized when obligations under the terms of a contract with our
customer 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. Revenue is measured as the amount of consideration we expect to receive in
exchange for transferring goods. 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.
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.
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.
58
58
59
59
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:
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
December
31, 2022
Years Ended
December
25, 2021
December
26, 2020
$104,097
98,954
119,401
16,183
4,490
343,125
5,256
2,472
21,640
29,368
$313,757
$115,949
96,166
119,550
11,337
3,240
346,242
8,304
2,488
21,838
32,630
$313,612
$104,147
80,419
109,297
8,226
2,312
304,401
7,837
1,648
21,267
30,752
$273,649
All Amounts in Thousands
Gross Sales by Channel:
Mass Merchants
Specialty Dealers
E-commerce
International
Other
Total Gross Sales
Less: Gross-to-Net Sales Adjustments
Returns
Warranties
Customer Allowances
Total Gross-to-Net Sales Adjustments
Total Net Sales
Note 17 — Subsequent Events
On February 21, 2023, the Company’s Board of Directors approved a plan to close the Company’s manufacturing
facilities in Rosarito, Mexico and to dispose of those facilities. The strategic decision to cease the Company’s
manufacturing operations in Mexico is part of the Company’s ongoing efforts to improve profitability and to drive
operational efficiencies.
ESCALADE, INCORPORATED
By:
/s/ Walter P. Glazer, Jr.
Walter P. Glazer, Jr.
President and Chief Executive Officer
February 24, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Walter P. Glazer, Jr.
Walter P. Glazer, Jr.
/s/ Katherine F. Franklin
Katherine F. Franklin
/s/ Edward E. Williams
Edward E. Williams
/s/ Richard Baalmann, Jr.
Richard Baalmann, Jr.
/s/ Anita Sehgal
Anita Sehgal
/s/ Patrick Griffin
Patrick Griffin
/s/ Stephen R. Wawrin
Stephen R. Wawrin
Chairman and Director and
President and Chief Executive
Officer
February 24, 2023
Director
Director
Director
Director
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
Director
February 24, 2023
Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
February 24, 2023
60
60
61
61
Exhibit 23.1
Independent Registered Public Accounting Firm Consent
We consent to the incorporation by reference in the registration statement of Escalade, Incorporated on Form S-8
(File No. 333-218340) of our report dated February 24, 2023, on our audits of the consolidated financial statements
of Escalade, Incorporated as of December 31, 2022, and December 25, 2021, and for each of the three years in the
period ended December 31, 2023, which report is included in this Annual Report on Form 10-K.
/s/ FORVIS, LLP
FORVIS, LLP
Evansville, Indiana
February 24, 2023
Exhibit 21
ESCALADE, INCORPORATED AND SUBSIDIARIES
List of Subsidiaries at December 31, 2022
Parent
Escalade, Incorporated
Subsidiaries (1)
Indian Industries, Inc.
U.S. Weight, Inc.
Lifeline Products, LLC
Harvard Sports, Inc.
Harvard California, S. DE R.L. C.V.
Bear Archery, Inc.
Escalade Sports Playground, Inc.
Escalade Sports (Shanghai) Co., Ltd.
Wedcor Holdings, Inc.
EIM Company, Inc.
SOP Services, Inc.
Escalade Insurance, Inc.
Goalsetter Systems, Inc.
Victory Tailgate, LLC
Victory Made, LLC
State of or Other
Jurisdiction of
Incorporation
Percent of Voting
Securities Owned
by Parent
Indiana, USA
Indiana, USA
Illinois, USA
Illinois, USA
California, USA
B.C. Mexico
Florida, USA
North Carolina, USA
China
Indiana, USA
Nevada, USA
Nevada, USA
Nevada, USA
Iowa, USA
Florida, USA
Florida, USA
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(1) Each subsidiary Company has been included in Consolidated Financial Statements for all periods following its
acquisition. See Notes to Consolidated Financial Statements.
62
62
63
63
Exhibit 31.1
Exhibit 31.2
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Walter P. Glazer, Jr., certify that:
I, Stephen R. Wawrin, certify that:
1. I have reviewed this annual report on Form 10-K of Escalade, Incorporated;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15-15(f)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
1. I have reviewed this annual report on Form 10-K of Escalade, Incorporated;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15-15(f)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this annual report based on such evaluation; and
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this annual report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the
equivalent functions):
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant
b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
role in the registrant’s internal control over financial reporting.
Date: February 24, 2023
Date: February 24, 2023
64
/s/ Walter P. Glazer, Jr.
Walter P. Glazer, Jr.
Chief Executive Officer
64
/s/ Stephen R. Wawrin
Stephen R. Wawrin
Chief Financial Officer
65
65
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Escalade, Incorporated (the Company) on Form 10-K for the period ending
December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Walter
P. Glazer, Jr, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant
to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange
Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition
and result of operations of the Company.
/s/ Walter P. Glazer, Jr.
Walter P. Glazer, Jr.
Chief Executive Officer
February 24, 2023
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Escalade, Incorporated (the Company) on Form 10-K for the period ending
December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the Report), I,
Stephen R. Wawrin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange
Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition
and result of operations of the Company.
/s/ Stephen R. Wawrin
Stephen R. Wawrin
Chief Financial Officer
February 24, 2023
66
66
NOTES
NOTES
68
69
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
817 MAXWELL AVENUE
EVANSVILLE, IN 47711
812.467.1200
ESCALADEINC.COM
COMMON STOCK LISTING
NASDAQ
(SYMBOL: ESCA)
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FORVIS, LLP
TRANSFER AGENT
BROADRIDGE CORPORATE ISSUE SOLUTIONS, INC.
PO BOX 1342
BRENTWOOD, NY 11717
877.830.4936
BROADRIDGE.COM
INVESTOR RELATIONS
PATRICK GRIFFIN
812.467.1358
The Company’s annual shareholder meeting will be held
at 8:00 am (Central Daylight Savings Time) on
May 10, 2023 at the Corporate offices located at
817 Maxwell Avenue Evansville, IN 47711