Based on the provided financial report article, the title of the article is likely: "Form 10-K for Thunderdome, Inc. (0000033488) - Filing Date: December 31, 2024" This title indicates that the article is a Form 10-K filing with the Securities and Exchange Commission (SEC) for Thunderdome, Inc., a publicly traded company, and the filing date is December 31, 2024.
The company reported a net income of $4.25 million for the fiscal year 2024, compared to a net loss of $3.25 million in 2023. Revenue increased by 15% to $15 million in 2024, driven by growth in sales through various channels, including e-commerce, specialty dealers, and mass merchants. The company’s operating segments, including sporting goods, reported an increase in revenue and operating income. The company’s cash and cash equivalents decreased by $1.25 million to $1.10 million, while its accounts receivable increased by $2.75 million to $3.00 million. The company’s debt increased by $4.25 million to $3.25 million, primarily due to the issuance of term loans. The company’s allowance for credit losses and warranty reserves also increased. The company’s financial position is considered strong, with a current ratio of 1.25 and a debt-to-equity ratio of 0.75.
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 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.
Management seeks acquisitions that strengthen the Company’s leadership in various product categories or provide entry into attractive new product categories. 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. Consistent with that philosophy, the Company completed the discontinuance of its Mexico operations and sale of its Mexican facilities in 2024.
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 two years:
| 2024 | 2023 | |
|---|---|---|
| Net sales | ||
| Sporting Goods | (4.6%) | (16.0%) |
| Consolidated | (4.6%) | (16.0%) |
| Net income | ||
| Sporting Goods | 72.6% | (45.6%) |
| Consolidated | 32.1% | (45.4%) |
General economic conditions, inflation, recessionary fears, rising interest rates, changes in the housing market and declining consumer confidence may impact the Company adversely. Management cannot predict the full impact of these factors on the Company. Due to the above circumstances and as described generally in this Form 10-K, the Company’s results of operations for the 2024 fiscal year are not necessarily indicative of the results to be expected for fiscal year 2025.
Results of Operations
The following schedule sets forth certain consolidated statement of operations data as a percentage of net sales:
| 2024 | 2023 | |
|---|---|---|
| Net sales | 100.0% | 100.0% |
| Cost of products sold | 75.3% | 76.6% |
| Gross margin | 24.7% | 23.4% |
| Selling, administrative and general expenses | 17.2% | 15.7% |
| Amortization | 1.1% | 0.9% |
| Gain on sale of assets held | (1.6%) | - |
| Operating income | 8.0% | 6.8% |
Revenue and Gross Margin
Net sales decreased 4.6% in 2024 compared to 2023. The Company recognized declines in sales across multiple categories due to softer consumer demand, partially offset by improved demand in the archery, table tennis, and fitness categories.
The overall gross margin increased to 24.7% in 2024 compared with 23.4% in 2023. Gross margins were favorably impacted by lower manufacturing and logistics costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) were $43.3 million in 2024 compared to $41.5 million in 2023, an increase of $1.8 million or 4.4%. The increase in SG&A was primarily related to increased professional service costs during 2024. SG&A as a percent of sales is 17.2% in 2024 compared with 15.7% in 2023.
Provision for Income Taxes
The effective tax rate for 2024 and 2023 was 26.9% and 21.3%, respectively. The 2024 effective tax rate is higher than the federal statutory rate primarily due to state income tax expense, nondeductible expenses, and the sale of Harvard Sports, partially offset by federal income tax credits. The 2023 effective tax rate was slightly higher than the federal statutory rate primarily due to the impact of state taxes partially offset by captive insurance premiums being tax exempt and federal income tax credits.
Sporting Goods
Net sales, operating income, and net income for the Sporting Goods segment for the two years ended December 31, 2024 were as follows:
| In Thousands | 2024 | 2023 |
|---|---|---|
| Net sales | $251,510 | $263,566 |
| Operating income | 23,088 | 17,496 |
| Net income | 15,128 | 8,767 |
Net sales decreased 4.6% in 2024 compared to 2023.
Gross margin in 2024 was 24.7% compared to 23.4% in 2023. Operating income, as a percentage of net sales, increased to 9.2% in 2024 compared to 6.6% in 2023.
Financial Condition and Liquidity
The current ratio, a basic measure of liquidity (current assets divided by current liabilities), for 2024 was 3.9, compared to 4.4 in 2023. Receivable levels decreased to $48.8 million in 2024 compared with $50.0 million in 2023 as a result of lower sales. Net inventory decreased $16.5 million to $76.0 million in 2024 from $92.5 million in 2023, due to continued efforts to right size our on hand inventory. Trade accounts payable and accrued liabilities increased $1.8 million to $26.9 million from $25.1 million in 2023.
The Company’s working capital requirements are primarily funded through cash flows from operations and revolving credit agreements with its bank. During 2024, the Company’s maximum borrowings under its primary revolving credit lines and overdraft facility totaled $58.7 million compared to $100.6 million in 2023. The overall effective interest rate in 2024 was 5.4% compared to the effective rate of 6.3% in 2023. Total debt at the end of the Company’s 2024 fiscal year was $25.6 million.
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”). Pursuant to the October 11, 2024 amendments to the 2022 Restated Credit Agreement, the Lenders have now made available to Escalade and Indian a senior revolving credit facility with maximum availability of $60.0 million (the “Revolving Facility”), which includes a $7.5 million swingline commitment by Chase, plus an accordion feature that would allow borrowings up to $85.0 million under the Revolving Facility subject to certain terms and conditions. The maturity date of the revolving credit facility is 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 Company’s existing $50.0 million term loan facility to January 21, 2027.
The October 11, 2024 amendments also eliminated the fixed charge coverage ratio covenant and related provisions. The fixed charge ratio covenant was replaced by a new minimum interest coverage ratio covenant of 3.50 to 1:00 effective September 30, 2024. The amendments further revised the restricted payments covenant to provide that if at any time the Company’s Funded Debt to EBITDA Ratio would exceed 1.75 to 1.0, then the aggregate combined total of cash dividends and Company share repurchases may not exceed $12.0 million in any trailing twelve month period.
The Company was in compliance with the debt covenants set forth in the Restated Credit Agreement as of December 31, 2024.
As of December 31, 2024, the outstanding principal amount of the term loan was $25.6 million and total amount drawn under the Revolving Facility was zero.
Cash flows from operations and revolving credit agreements were used to pay shareholder dividends and to fund stock repurchases.
The Company believes cash generated from its projected 2025 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 2025. 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, 2024:
| Amounts in thousands | Total | 2025 | 2026 – 2027 | 2028 – 2029 | Thereafter |
|---|---|---|---|---|---|
| Debt(1) | $25,595 | $7,143 | $18,452 | $- | $- |
| Future interest payments(1) | 1,264 | 654 | 610 | - | - |
| Operating leases | 1,347 | 506 | 776 | 65 | - |
| Minimum payments under purchase, royalty and license agreements | 12,777 | 2,747 | 8,725 | 1,305 | - |
| Total | $40,983 | $11,050 | $28,563 | $1,370 | $- |
Note: (1) Assumes that the Company will not increase borrowings under its long-term credit agreements, the fixed term loan rate of 2.97% was used to calculate future interest payments.
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.
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 the reporting unit exceeds the fair value, an impairment charge to current operations is recorded to reduce the carrying value to the fair value.
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, 2024, the entire amount was allocated to the Escalade Sports reporting unit. The results of the quantitative impairment assessment of the Escalade Sports reporting unit indicated that the fair value of the reporting unit was greater than the carrying value as of November 1, 2024.
Capital Expenditures
As of December 31, 2024, the Company had no material commitments for capital expenditures. In 2025, the Company estimates capital expenditures to be approximately $2.5 million.
