ESCALADE INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002
COMMISSION FILE NUMBER 0-6966

ESCALADE, INCORPORATED
(Exact name of registrant as specified in its charter)

Indiana 13-2739290
(State of incorporation) (IRS EIN)

817 Maxwell Avenue, Evansville, Indiana 47711
(Address of principal executive office)

(812) 467-1200
(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act
NONE

Securities registered pursuant to Section 12(g) of the Act
Common Stock, No Par Value
(Title of class)

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ______________________________________________

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12 b-2 of the Act). yes |X| no | |

Aggregate market value of voting stock held by nonaffiliates of the registrant
as of July 12, 2002: $89,686,908

The number of shares of Registrant's common stock (no par value) outstanding as
of February 28, 2003: 6,509,006

Documents Incorporated by Reference

Certain portions of the registrant's Proxy Statement relating to its annual
meeting of stockholders scheduled to be held on April 26, 2003 are incorporated
by reference into Part III of this Report.

Index to Exhibits is found on page 16.

ESCALADE, INCORPORATED AND SUBSIDIARIES

TABLE OF CONTENTS

PAGE
----

PART I

Item 1. Business 1

Item 2. Properties 6

Item 3. Legal Proceedings 7

Item 4. Submission of Matters to a Vote of Security Holders 7

PART II

Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 7

Item 6. Selected Financial Data 8

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8

Item 7. A. Quantitative and Qualitative Disclosures About Market Risk 14

Item 8. Financial Statements and Supplementary Data 14

Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 14

PART III

Item 10. Directors and Executive Officers of the Registrant 14

Item 11. Executive Compensation 14

Item 12. Security Ownership of Certain Beneficial Owners and Management 15

Item 13. Certain Relationships and Related Transactions 15

Item 14. Controls and Procedures 15

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 16

PART I

ITEM 1--BUSINESS

GENERAL

Escalade, Incorporated (Escalade or Company) is a diversified company engaged in
the manufacture and sale of sporting goods and fitness products and office and
graphic arts products. Escalade and its predecessors have produced sporting
goods and fitness products for over 75 years and have produced office and
graphic arts products for over 65 years.

Escalade is the successor to The Williams Manufacturing Company, an Ohio-based
manufacturer and retailer of women's and children's footwear formed in 1922.
Through a series of acquisitions commencing in the 1970's, the Company has
diversified its business. The Company currently manufactures sporting goods and
fitness products in Evansville, Indiana, Olney, Illinois and Tijuana, Mexico and
manufactures office and graphic arts products in Wabash, Indiana and Tijuana,
Mexico.

In 1972, the Company merged with Martin Yale Industries, Inc. (Martin Yale), an
Illinois manufacturer of office and graphic arts products and leisure time items
such as toys and hobby and craft items. In 1973, the Company acquired both
Indian Industries, Inc. (Indian), an Indiana manufacturer of archery equipment
and table tennis tables, and Harvard Table Tennis, Inc., a Massachusetts
manufacturer of table tennis accessories. Escalade discontinued the Williams
Manufacturing footwear operations in 1976 and sold Martin Yale's leisure time
product line to an unaffiliated party in 1979. In 1980, the Company purchased
Harvard Sports, Inc. (formerly Crown Recreation (West), Inc.), a California
manufacturer of table tennis tables and home pool tables. In 1983, the Company
closed Harvard Table Tennis, Inc. and consolidated it with Harvard Sports, Inc.
(Harvard).

Escalade has diversified within both the sporting goods and fitness products and
office and graphic arts products industries, principally through the
introduction of new product lines and acquisitions of related assets and
businesses. Escalade expanded its sporting goods business in 1982 with the
introduction of basketball backboards, goals and poles. In 1988, the Company
acquired the business machine division assets of Swingline, Inc., further
expanding the range of products offered within the office machine and equipment
product lines. In 1989, the Company started limited manufacturing in Tijuana,
Mexico under a shelter program known as "maquiladora". In 1990, the Company
built a new manufacturing and office facility in Wabash, Indiana and
consolidated the manufacturing of office and graphic arts products into the new
facility. In 1994, the Company purchased certain assets of Data-Link Corporation
which manufactured products to apply postage and other stamps. In 1997, the
Company purchased Master Products Manufacturing Company, Inc. (Master Products),
a manufacturer of paper punches and catalog rack systems. In 1999, the Company
acquired certain assets of Mead Hatcher which manufactured keyboard drawers,
computer storage, copyholders, media retention systems and posting trays. Also,
in 1999, the Company purchased the assets of Zue Corporation which manufactured
high quality basketball systems. In 2000, the Company purchased the table tennis
table assets of Lifetime Products, Inc. In 2001, the Company acquired
substantially all of the assets of Accudart, a leading name in darts. Also, in
2001, the Company acquired substantially all of the assets of U. S. Weight,
Inc., the only U. S. manufacturer of filled vinyl weights and sets. U. S.
Weight's somewhat unique manufacturing operations remained in Olney, Illinois.
In 2002, the Company acquired all assets relating to The Step(R) product line
from Bollinger Industries. The Step(R) is America's original aerobic step
fitness system and should compliment the U. S. Weight acquisition. Also, in
2002, the Company acquired substantially all of the assets of Steve Mizerak,
Inc., the rights to the Willie Mosconi name, likeness and brand for use on
high-end billiard tables and equipment and certain assets of Murrey and Sons
related to the manufacture and distribution of the Murrey line of premium indoor
and outdoor billiard and soccer tables.

In November 2002, the Company signed a multi-year North American licensing
agreement with Ironman Properties granting Escalade Sports rights to the
Ironman(R) brand name for fitness products including dumbbells, weight plates,
barbells, weight sets, exercise accessories, and the Irongear brand for weight
benches and single and multi-station exercise machine.

In February 2003, the Company signed a multi-year billiards product endorsement
agreement with Jeanette Lee, A/K/A "The Black Widow". In addition to endorsing
the Murrey and Mosconi billiard brands, Escalade and Lee will jointly develop a
line of "Black Widow" billiard equipment and accessories.

On December 30, 2002, the Company acquired an additional 760,500 shares and on
January 30, 2003, an additional 340,000 shares of the outstanding stock of
Schleicher & Co. International AG (Schleicher), a German manufacturer and
distributor of paper shredders. With these acquisitions, the Company's total
ownership increased to 1,807,334 shares or 63% of the outstanding shares. At
December 28, 2002, the Company owned approximately 22% of Schleicher. The
Company is currently engaged in a tender offer to acquire all remaining shares.

In 2000, the Company established a new subsidiary, Indian-Martin AG, a Swiss
Corporation. The sole operation of Indian-Martin AG is to purchase accounts
receivable from the Company's manufacturing subsidiaries on a periodic basis.
Such purchases are funded by proceeds from the collection of the accounts
receivable and through borrowings under a $30 million line of credit provided to
Indian-Martin AG by Bank One, Indianapolis, National Association. This accounts
receivable purchase program enhances the Company's cash flow and results in
certain tax savings to the Company. As of December 28, 2002, Indian-Martin AG
owned and held approximately $34.1 million of accounts receivable purchased from
the Company's manufacturing subsidiaries.

The following table presents the percentages contributed to Escalade's net sales
by each of its business segments:

FISCAL YEAR 2002 2001 2000
- ----------- ---- ---- ----

Sporting goods 82% 80% 69%
Office and graphic arts products 18 20 31
--- --- ---
Total net sales 100% 100% 100%
=== === ===

For additional segment information, see the notes to consolidated financial
statements.

SPORTING GOODS

Escalade's sporting goods and fitness products are produced by Indian, Harvard
and U. S. Weight and are sold through a single consolidated sales and marketing
group, Escalade Sports. Escalade manufactures and sells a variety of sporting
goods such as table tennis tables and accessories, archery equipment, home pool
tables and accessories, combination bumper pool and card tables, game tables,
basketball backboards, goals and poles, darts, dart cabinets, vinyl weight sets
and workout benches and aerobic Step products. Some of Escalade's domestic
sporting goods shipments are made from National City, California, which
primarily services the Company's U. S. Western marketing region, but most of
such shipments are made from Evansville, Indiana, which primarily serves the
rest of the United States.

Escalade produces and sells sporting goods under the Indian Archery(R),
Harvard(R), Ping Pong(R), STIGA(R), Goalrilla(TM), Goaliath(R), Silverback(TM),
Rhino Play(TM), Accudart(R), U. S. Weight(TM), The Step(R) and PSE(R) brand
names. Many of Escalade's products are sold to Sears, Escalade's largest
customer, which accounted for approximately 47% of Escalade's sporting goods
items net sales in 2002. No other customer accounted for more than 10% of
Escalade's sporting goods net sales in 2002.

(2)

Certain of the Company's sporting goods products are subject to the regulation
of the Consumer Product Safety Commission. The Company believes that it is in
compliance with such regulations.

OFFICE AND GRAPHIC ARTS PRODUCTS

Escalade's office and graphic arts products are produced by Martin Yale and
Master Products and are sold through a single consolidated sales and marketing
group, Martin Yale. Escalade's office and graphic arts products include paper
trimmers, paper folding machines, paper drills, collators, decollators, bursting
machines, letter openers, paper joggers, checksigners, stamp affixers, paper
punches, paper cutters, catalog rack systems, bindery carts, business card
slitters, thermography machines, keyboard drawers, computer storage,
copyholders, media retention systems, posting trays and related accessories.
Escalade's office and graphic arts products business is conducted through Martin
Yale and Master Products.

Escalade produces and sells office and graphic arts products under the Martin
Yale(TM), Premier(R), Master(TM) and Mead Hatcher(TM) brand names. The Company
also manufactures various office and graphic arts products under private label
for original equipment manufacturers. Three customers individually accounted for
more than 10% of Escalade's office and graphic arts products net sales but not
more than 10% of consolidated net sales.

RELATIONSHIP WITH SEARS

The Company has supplied sporting goods to Sears for over 30 years beginning
with sales of archery equipment by Indian to Sears. Sears currently purchases
for resale a wide variety of Escalade's sporting goods. Sales to Sears accounted
for approximately 38% in 2002, 37% in 2001 and 31% in 2000 of Escalade's
consolidated sales. Even though the Company has no long-term contracts with
Sears, the Company believes that sales to Sears will continue and that relations
with Sears are good.

Escalade has been recognized by Sears for its outstanding service in 22 of the
last 29 years. Sears has awarded Escalade the Sears "Partners in Progress Award"
during those years based upon quality, service and product innovation. Sears
makes this award to less than 80 suppliers each year. During this period, Sears
had more than 10,000 suppliers. In 1987, Sears further recognized the Company by
awarding Escalade the Sears 1986 "Source of the Year Award" in the
recreation-automotive group. In 2001, in addition to the Partners in Progress
Award, Escalade was awarded Hardlines Vendor of the Year and Category Vendor of
the Year.

MARKETING AND PRODUCT DEVELOPMENT

Escalade has developed its existing product lines to adapt to changing
conditions. Escalade believes that it is prepared to react to changing market
and economic developments primarily by continuing the quality/price structure of
the Company's product lines and by conducting ongoing research and development
of new products. Escalade is committed to being customer focused.

For many of its sporting goods products, Escalade offers its customers a choice,
based on quality and price, of its line of "good, better and best" items. Such
products are priced in relation to their quality which enables the Company to
sell its goods through a variety of department stores, mass merchandisers,
wholesale clubs, catalog showrooms, discount houses, general sporting goods
stores, specialty sporting goods stores and hardware chains. As a result of such
quality/price structure, Escalade is able to meet the quality/price objectives
of the consumers served by such retail channels.

(3)

Escalade sells its office and graphic arts products through office machine
dealers, office supply houses and office product catalogs. Certain of Escalade's
office products, such as paper trimmers and paper folders, are marketed in a
quality/price range designed to accommodate customer needs. Lower cost items are
generally intended for light duty office applications, whereas higher cost items
are more rugged or more sophisticated, and are intended for use in heavy duty or
commercial applications.

Escalade conducts much of its marketing efforts through a network of independent
sales representatives in the office and graphic arts industries. Marketing
efforts in the sporting goods business are coordinated through a marketing
department as well as through a network of Company and independent sales
representatives.

The Company engaged in ongoing research and development activities for new
products in each of its business segments. Escalade spent approximately
$1,520,000 in 2002, $2,150,000 in 2001 and $1,700,000 in 2000 for research and
development activities.

COMPETITION

Escalade is subject to competition with various manufacturers of each product
line produced or sold by Escalade. The Company is not aware of any other single
company that is engaged in both the same industries as Escalade or that produces
the same range of products as Escalade within such industries. Nonetheless,
competition exists for many Escalade products within both the sporting goods and
office and graphic arts industries and 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, to attract new customers and to develop new products that
satisfy the quality and price requirements of sporting goods and office and
graphic arts customers.

LICENSES, TRADEMARKS AND BRAND NAMES

Escalade Sports has an agreement and contract with Sweden Table Tennis AB for
the exclusive right and license to distribute and produce table tennis equipment
under the brand name STIGA(R) for the United States and Canada. Escalade Sports
has a non-exclusive, non-transferable license to use the trademark PSE(R) only
and specifically for the purpose of applying to juvenile archery equipment and
approved archery accessories retailing up to $79.99. Escalade Sports has a
licensing agreement with Ironman Properties for the rights to the Ironman(R)
brand name for fitness products including dumbbells, weight plates, barbells,
weight sets and exercise accessories.

Escalade is the owner of several registered trademarks and brand names. For its
sporting goods, the Company holds the Ping-Pong(R), Harvard(R), Accudart(R),
Indian Archery(R) and Goaliath(R), registered trademarks and utilizes the
Goalrilla(TM), Silverback(TM), Rhino Play(TM), U. S. Weight(TM), The Step(R),
Ironman(R), Murrey(R), Mosconi(R), Mizerak(R) and PSE(R) brand names. The
Company also owns the Premier(R) registered trademark for its office and graphic
arts products, in addition to manufacturing such products under the Martin
Yale(TM), Master Products(TM) and Mead Hatcher(TM) brand names.

(4)

SEASONALITY

The backlog of unshipped orders by industry segment is shown below at the
Company's 2002, 2001 and 2000 fiscal year end. All orders in backlog at year end
are generally shipped during the following year. The backlog includes all orders
received but not shipped. Escalade's sporting goods business is seasonal and,
therefore, the backlog is subject to fluctuations. Due to the heavy Christmas
season demand for the Company's sporting goods products, approximately 75% of
the sporting goods sales are made in the last two quarters of the year. The
office products and graphic arts products business is generally consistent and
does not have significant seasonality fluctuations.

YEARS ENDED DECEMBER 28, DECEMBER 29
AND DECEMBER 30 2002 2001 2000
- ------------------------------------ ---- ---- ----

Orders received but not shipped
Sporting goods $3,626,800 $2,697,100 $1,566,800
Office and graphic arts products 640,900 398,800 558,400

EMPLOYEES

The Company employs between 650 and 765 employees, consisting of between 250 and
300 people at Indian's Evansville, Indiana facilities, between 25 and 40 at U.
S. Weight's Olney, Illinois facility, between 100 and 150 at Harvard's National
City, California and Tijuana, Mexico facilities, approximately 125 employees at
Martin Yale's Wabash, Indiana facilities and approximately 150 at Master
Products' Tijuana, Mexico facility. The number of employees at the Company's
Evansville, Indiana, Olney, Illinois, National City, California and Tijuana,
Mexico sporting goods facilities increases in the last half of the year to
handle the higher Christmas season demand for the Company's sporting goods
products. All hourly rated employees at Evansville are represented by the
International Union of Electronic, Electrical, Salaried, Machine and Furniture
Workers AFL-CIO, whose contract expires April 27, 2003. Negotiations for the new
contract will begin in March 2003.

Escalade believes that its employee relations are satisfactory.

SOURCES OF SUPPLIES

Raw materials for Escalade's various product lines consist of wood, particle
board, slate, standard grades of steel, steel tubing, plastic, vinyl, steel
cables, fiberglass and packaging. Escalade relies upon suppliers in Europe and
Brazil for its requirement of billiard balls and slate utilized in the
production of home pool tables and upon various Asian manufacturers for certain
of its table tennis needs and other items. Escalade sources some of its game
table product line in China.

The Company believes that these sources will continue to provide adequate
supplies as needed. All other materials needed for the Company's various
operations are available in adequate quantities from a variety of domestic and
foreign sources.

(5)

ITEM 2--PROPERTIES

The Company operates the following facilities:

LOCATION SIZE LEASED OR OWNED
-------- ---- ---------------

Evansville, Indiana (1) 346,000 sq. ft. Owned
Olney, Illinois (1) 40,000 sq. ft. Leased
National City, California (1) 51,024 sq. ft. Leased
Tijuana, Mexico (1) 50,000 sq. ft. Owned
Wabash, Indiana (2) 141,000 sq. ft. Owned
Tijuana, Mexico (2) 84,000 sq. ft. Leased

(1) Sporting goods facilities

(2) Office products facilities

The Company leases warehousing and office space at its National City, California
facilities and the term of the lease is five years. The lease rate ranges from
$223,736 in year one to $272,971 in year five. The Company also shares in common
area expenses not to exceed 8(cent) per sq. ft. per month. The lease expires
January 31, 2006.

The Company's Wabash facilities are held subject to a mortgage financed by
Economic Development Revenue Bonds. The 141,000 square foot facility is a
pre-engineered metal building supported by structured steel and concrete block
consisting of 21,000 square feet warehousing, 6,000 square feet office and
114,000 square feet manufacturing.

The Company also leases warehousing space next to its Evansville facility for
$18,554 per month. The lease expires on October 31, 2004. The Company has one
two-year renewal option followed by two five-year renewal options.

The Company leases space in Tijuana, Mexico for its office products operations
for $26,240 per month. The lease expires on May 31, 2004.

The Company rents additional space in Tijuana, Mexico for its sporting goods
operations for $10,000 per month. The lease expires December 31, 2005.

The Company leases space in Olney, Illinois for the production of its vinyl
weight sets for $5,200 per month. The lease expires on June 1, 2003.

The Company leases space in Evansville for finished goods warehousing and
shipping for $11,500 per month. The lease expires July 31, 2004. This lease was
previously on a month-to-month basis.

The Company closed and sold its Los Angeles, California facilities in 2002.

The Company believes that its facilities are in excellent condition and suitable
for their respective operations. The Evansville, Wabash and Tijuana sites also
contain several undeveloped acres which could be utilized for expansion.

The Company believes that all of its facilities are in compliance with
applicable environment regulations and is not subject to any proceeding by any
federal, state or local authorities regarding such matter. The Company provides
regular maintenance and service on its plants and machinery as required.

(6)

ITEM 3--LEGAL PROCEEDINGS

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 such claims or lawsuits will have a material adverse affect on the
business or financial condition of the Company.

ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5--MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's common stock is traded under the symbol "ESCA" on the Nasdaq
National Market. The following table sets forth, for the calendar periods
indicated, the high and low sales prices of the Common Stock as reported by the
Nasdaq National Market:

PRICES HIGH LOW
- ------ ---- ---

2002
Fourth quarter ended December 28, 2002 $20.09 $19.49
Third quarter ended October 5, 2002 19.85 19.16
Second quarter ended July 13, 2002 22.48 21.27
First quarter ended March 23, 2002 19.91 19.30
2001
Fourth quarter ended December 29, 2001 $17.33 $10.34
Third quarter ended October 6, 2001 12.17 7.65
Second quarter ended July 14, 2001 7.98 7.33
First quarter ended March 24, 2001 8.46 6.58

The closing market price on February 28, 2003 was $14.58 per share.

On February 23, 2002, the Board of Directors declared a 3 for 1 stock split
payable to stockholders of record on March 15, 2002, which was distributed on
March 28, 2002. All per share amounts have been adjusted to reflect the 3 for 1
stock split.

There were approximately 250 holders of record of the Company's Common Stock at
February 28, 2003. The approximate number of stockholders, including those held
by depository companies for certain beneficial owners, was 900.

(7)

ITEM 6--SELECTED FINANCIAL DATA (In thousands, except per share data)

DECEMBER 28, December 29, December 30, December 25, December 26,
AT AND FOR YEARS ENDED 2002 2001 2000 1999 1998
- ---------------------- ------------ ------------ ------------ ------------ ------------

INCOME STATEMENT DATA
Net sales
Sporting goods $126,745 $118,867 $ 79,948 $ 52,767 $ 63,072
Office and graphic
arts products 28,710 29,986 36,133 33,407 30,486
Total net sales 155,455 148,853 116,081 86,174 93,558
Net income 11,138 11,139 8,100 6,100 6,136
Weighted-average shares 6,486 6,447 7,083 9,114 9,285
PER SHARE DATA
Basic earnings per share $ 1.72 $ 1.73 $ 1.14 $ .67 $ .66
Cash dividends 0 0 0 0 .33
BALANCE SHEET DATA
Working capital 27,041 13,574 12,485 14,899 15,763
Total assets 96,788 76,111 69,476 66,850 63,489
Short-term bank debt 11,223 9,770 13,267 11,570 10,100
Long-term bank debt 16,700 6,800 12,700 10,700 6,400
Total stockholders' equity 45,875 34,396 23,960 29,438 26,702

ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

2002 COMPARED TO 2001

2002 was a good year for the Company. Net sales of $155,455,000 were a new high
while net income of $11,138,000 and basic earnings per share of $1.72 were
virtually the same as the $11,139,000 net income and $1.73 per share basic
earnings for 2001 which were all time highs.

In March 2002, Escalade Sports acquired substantially all of the assets of Steve
Mizerak, Inc. which included an exclusive line of billiard equipment along with
the trademarks of "Steve Mizerak", Mizerak", "The Miz", and "The Miz
Collection". In April 2002, Escalade Sports acquired the rights to the Willie
Mosconi name, likeness and brand for use on high-end billiard tables and
billiard equipment. In May 2002, Escalade Sports acquired certain assets of
Murrey and Sons relating to the manufacture and distribution of Murrey's
exclusive line of premium indoor and outdoor billiard and soccer tables. In
November 2002, Escalade Sports signed a licensing agreement with Ironman
Properties to use the Ironman(R) brand name for certain fitness products. In
February 2003, the Company signed a multi-year billiards product endorsement
with Jeanette Lee, A/K/A "The Black Widow". In addition to endorsing the Murrey
and Mosconi billiard brands, Escalade and Lee will jointly develop a line of
"Black Widow" billiard equipment and accessories. These acquisitions should
complement Escalade Sports existing product lines. Escalade Sports will continue
to focus on the integration of these acquisitions and the development of new
products for the new brand names. Current conditions indicate that 2003 may be
another growth year for sporting goods with continuing market share gains.

(8)

Martin Yale's sales continued to be negatively impacted in 2002 by the overall
slowdown in the U. S. economy, which adversely impacted orders for Martin Yale's
products. During the year 2002, Martin Yale began a project to evaluate the
opportunity to exclusively market a unique patented line of photo frame and
desktop accessories with a patented "pop-out" front matte. The total expense for
this project in 2002 was $873,000. The Company will continue to evaluate this
product in 2003. Martin Yale sold its Los Angeles property in 2002 for a gain of
$434,000. Martin Yale is currently engaged in a tender offer to acquire the
remaining outstanding shares of Schleicher International AG, a German
manufacturer and distributor of paper shredders. Martin Yale owned 63% of the
outstanding shares at the start of the tender offer in February 2003. Martin
Yale believes it can increase sales and reduce costs by focusing on the
complementary strengths of each company.

In 2002, net sales increased 4.4% or $6,602,000 to $155,455,000 from
$148,853,000 in 2001.

Sporting goods net sales increased by $7,878,000, or 6.6% from $118,867,000 to
$126,745,000. 90% of this increase was in new fitness and darting products from
recent acquisitions. 10% was in existing product lines.

Office and graphic arts products net sales decreased by $1,276,000, or 4.3% to
$28,710,000 from $29,986,000. This decrease was due mainly to the poor economic
environment.

Cost of sales of $111,164,000 as a percentage of net sales was 71.5% in 2002 as
compared to $106,921,000, or 71.8% in 2001. This decrease in cost of sales was
in sporting goods products and was caused by slightly lower material and labor
cost due to product mix.

Selling, administrative and general expenses in 2002 were $26,328,000, or 16.9%
of net sales as compared to $21,850,000, or 14.7% in 2001. This increase in
selling, general and administrative expense as a percentage of net sales was due
to higher insurance, customer program and compensation expenses, the West Coast
Port closure and the additional expense related to the photo frame/desktop
accessories product line evaluation.

Interest expense in 2002 was $951,000 as compared to $1,359,000 in 2001, a
decrease of $408,000, or 30.0%. This decrease in interest expense was due to
lower interest rates.

The income tax provision for 2002 was $5,804,000 for an effective rate of 34.3%.

Net income for the year was $11,138,000 as compared to $11,139,000 in 2001. An
increase in sporting goods net income due to acquisitions was offset by a
decrease in office and graphic arts net income due to decreased sales and an
increase in corporate compensation expense from the cashless exercise of stock
options and higher professional fees.

ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

2001 COMPARED TO 2000

2001 was another excellent year for the Company. Net sales of $148,853,000, net
income of $11,139,000 and basic earnings per share of $5.18 were all time highs.
On February 26, 2002, the Company announced that at its regular meeting on
February 23, 2002, the Board of Directors declared a 3 for 1 stock split of
Escalade common stock, no par value, to be distributed on March 28, 2002 to
stockholders of record on March 15, 2002. Based on the current 2,141,364 shares
outstanding, there would be 6,424,092 shares outstanding after the stock split.
Using the after split outstanding shares, the basic earnings per share for 2001
would be $1.73.

(9)

In February 2001, Escalade Sports acquired substantially all of the assets of
Accudart, a leading name in darts. Winmau(R), a leading name in dartboards, will
be distributed in the USA exclusively by Escalade Sports as part of the purchase
agreement. In September 2001, Escalade Sports acquired substantially all the
assets of U. S. Weight, Inc., the only U. S. manufacturer of filled vinyl
weights and sets. The manufacturing operations remained in Olney, Illinois while
the sales and marketing was consolidated in Evansville. In January 2002,
Escalade Sports acquired all assets relating to The Step(R) product line from
Bollinger Industries. The Step(R) is America's original aerobic step fitness
system and is widely used by individuals and at over 18,000 health clubs. Sales
of the product acquired in the Zue Corp. (Goalrilla), Accudart, Lifetime Table
Tennis business and U. S. Weight acquisitions totaled $20,000,000 in 2001.
Escalade Sports will continue to look for acquisitions that would increase
revenues, work on improving current product margins and quality and continue to
concentrate on increasing import product sales during 2002.

Martin Yale's sales were negatively impacted in 2001 by the overall slowdown in
the U. S. economy, which adversely impacted orders for Martin Yale's products.
Inventory reduction and distribution center consolidation in the industry also
adversely impacted sales. During the year 2001, Martin Yale started to move its
Los Angeles, California manufacturing operations to Tijuana, Mexico. This move
was completed in February 2002. The cost of this move resulted in approximately
$700,000 pre-tax expense in the year 2001. Distribution for the West Coast will
also be relocated to Mexico by the end of April 2002. It is uncertain at this
time if and when the slowdown in the economy and the adverse affect on Martin
Yale's orders will end. In addition to our cost reduction efforts, Martin Yale
will continue to focus on increasing sales.

In 2001, net sales increased 28.2% or $32,772,000 to $148,853,000 from
$116,081,000 in 2000.

Sporting goods net sales increased by $38,919,000, or 48.7% from $79,948,000 to
$118,867,000. 74% of this increase was in game parlor which includes table
tennis, pool and game tables and accessories and was due to an increase in units
sold. 17% was in archery, basketball, darts and dartboards. 9% was in fitness.

Office and graphic arts products net sales decreased by $6,147,000, or 17% to
$29,986,000 from $36,133,000. This decrease was due to the poor economic
environment, customer inventory reductions and distribution center
consolidations.

Cost of sales of $106,921,000 as a percentage of net sales was 71.8% in 2001 as
compared to $79,320,000, or 68.3% in 2000. This increase in cost of sales was in
office and graphic arts products and was due to higher factory expense as a
percentage of net sales. The primary reasons for the increase in factory expense
as percentage of the net sales were an increase in product development expense
and the lower sales volume.

Selling, administrative and general expenses in 2001 were $21,850,000, or 14.7%
of net sales as compared to $20,253,000, or 17.5% in 2000. This decrease in
selling, general and administrative expense as a percentage of net sales was in
the sporting goods products segment and was due to the higher sales volume and a
decrease in marketing expense.

Interest expense in 2001 was $1,359,000 as compared to $2,092,000 in 2000, a
decrease of $733,000, or 35%. This decrease in interest expense was due to lower
borrowing levels and lower interest rates.

The income tax provision for 2001 was $6,292,000 for an effective rate of 36%.

Net income for the year was $11,139,000 as compared to $8,100,000 in 2000, an
increase of 38% or $3,039,000. Sporting goods net income was up 91% or
$3,201,000 due to increased sales and office and graphic arts net income was
down 29% or $1,488,000 due to decreased sales and corporate interest expense
decreased 83% or $950,000.

(10)

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES

The Company's net cash provided by operating activities was $3,874,512,
$19,617,833 and $11,533,587 in 2002, 2001 and 2000. Inventory management
provided (used) cash of $(1,003,728), $860,521 and $(3,156,221) in 2002, 2001
and 2000. Accounts receivable used cash of $6,909,173, $521,450 and $1,775,023
in 2002, 2001 and 2000.

INVESTING ACTIVITIES

The Company's net cash used by investing activities was $13,101,445, $10,649,698
and $2,266,008 in 2002, 2001 and 2000. The Company used $3,084,962, $2,738,548
and $915,667 in 2002, 2001 and 2000 to purchase property and equipment. In 2002,
the Company used $11,714,747 for certain acquisitions. The Company expects that
it will continue to explore additional acquisition opportunities.

FINANCING ACTIVITIES

Net cash provided (used) by financing activities in 2002, 2001 and 2000 was
$11,676,516, $(9,194,635) and $(9,876,849). In 2000, the Company paid
$10,500,000 and borrowed $10,500,000 of long-term debt and also used $13,687,908
to purchase its common stock. In 2001, the Company paid $5,900,000 and borrowed
$833,335 of long-term debt. In 2002, the Company borrowed $14,900,000 and paid
$5,166,667 of long-term debt.

The Company's short term working capital requirements are funded by cash flow
and a $30,000,000 revolving line of credit used to finance the purchase of trade
receivables by the Company's Swiss subsidiary from the Company's manufacturing
subsidiaries. The Company utilizes a borrowing base formula which defines and
identifies eligible accounts receivable in order to calculate the maximum amount
that could be borrowed under this revolving line of credit. At December 28,
2002, the maximum amount that could be drawn under this line of credit was
$27,445,518 of which $11,223,317 was used.

The $30,000,000 revolving line of credit had an initial scheduled maturity date
of May 14, 2001, which date can be extended upon the agreement of the parties.
The maturity date has been extended until July 15, 2003. Indian-Martin AG's
borrowings under this line of credit are not guaranteed by, and are without
recourse to, the Company or any of the Company's subsidiaries. This line of
credit replaced the Company's prior $12,000,000 short term revolving line of
credit.

The Company's long-term financing requirements are currently funded by a
$25,000,000 revolving term loan which expires March 31, 2006. Under the terms of
the credit agreement, which was amended in October 2001, the maximum borrowing
available to the Company under this revolving term loan is reduced by $5,000,000
on March 31 of each year until the line expires. The October 2001 amendment
increased the amount of available borrowing from the prior maximum amount of
$20,500,000. The Company uses this revolving term loan from time to time to
finance acquisitions, stock buy backs and other material obligations that may
arise. The Company believes that future long term funding for acquisitions,
stock buy backs or other material obligations deemed appropriate by the
Company's Board of Directors is available from similar credit vehicles and/or
other financial institutions.

The Company declared no cash dividends during 2000, 2001 and 2002.

On February 21, 2003, the Company's Board of Directors authorized the purchase
of up to $3,000,000 of its common stock on the open market or through privately
negotiated transactions at prices deemed advantageous to the Company.

(11)

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, SFAS No. 142, Goodwill and Other Intangible Assets, was issued.
This statement discontinued the practice of amortizing goodwill and indefinite
lived intangible assets and initiated an annual review for impairment.
Impairment is to be examined more frequently if certain indicators are
encountered. The Company has completed the initial and the annual goodwill
impairment test required by this standard and has determined that no impairment
exists. Intangible assets with a determinable useful life will continue to be
amortized over that period. The Company adopted the amortization provisions of
SFAS No. 142 effective December 30, 2001. The effect of the elimination of
goodwill amortization increased net income by approximately $827,000 in 2002.

The pro forma after-tax effect of the elimination of goodwill amortization as if
SFAS No. 142 had been effective in 2001 and 2000, was approximately $827,000 and
$795,000, respectively.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. Adoption of
this standard is not expected to have a material effect on the Company's
Consolidated Financial Statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement eliminates the allocation of
goodwill to long-lived assets to be tested for impairment and details both a
probability-weighted and "primary-asset" approach to estimate cash flows in
testing for impairment of a long-lived asset. SFAS No. 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001.
Adoption of this standard did not have a material effect on the Company's
Consolidated Financial Statements.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. This statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). This statement requires
recognition of a liability for a cost associated with an exit or disposal
activity when the liability is incurred, as opposed to being recognized at the
date an entity commits to an exit plan. This statement also establishes that
fair value is the objective for initial measurement of the liability. This
statement is effective for exit or disposal activities that are initiated after
December 31, 2002. Adoption of this standard is not expected to have a material
effect on the Company's Consolidated Financial Statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure--an Amendment of FASB Statement No. 123.
This statement provides alternative methods of transition for a voluntary change
to the fair value method of accounting for stock-based employee compensation.
This statement is effective for financial statements for fiscal years ending
after December 15, 2002. As permitted by SFAS No. 148, the Company will continue
to apply the provisions of APB Opinion No. 25, Accounting for Stock-Based
Compensation, for all employee stock option grants and provide all disclosures
required. In addition, the Company is awaiting further guidance and clarity that
may result from current FASB stock compensation projects and will continue to
evaluate any developments concerning mandated, as opposed to optional,
fair-value based expense recognition.

In November 2002, the FASB issued Interpretation No. 45, (FIN 45), Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which elaborates on the disclosures to be
made by a guarantor about its obligations under certain guarantees issued. It
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and measurement provisions of
this Interpretation apply on a prospective basis to guarantees issued or
modified after December 31, 2002. The disclosure requirements in this
Interpretation are effective for periods ending after December 15, 2002. The
Company has product warranties that fall under the scope of FIN 45. Adoption of
the requirements of FIN 45 is not expected to have a material effect on the
Company's Consolidated Financial Statements.

(12)

The Company provides limited warranties on certain of its products. Generally,
the warranty periods range from 90 days to one year. The Company provides a
seven-year warranty on the slatron bed component of its billiards tables, a
ten-year warranty on the slate bed component of its billiards tables, a lifetime
limited warranty on some of its paper trimmers including blades and a lifetime
warranty on the structure of the pole on its Goalrilla(TM) and Goaliath(R)
basketball goals. The Company records an accrued liability and expense 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 expense in the current year. A reconciliation of the liability is
as follows:

YEAR ENDED DECEMBER 28 2002
- ---------------------- ----

Beginning balance $1,306,600

Changes in liability for product warranties issued 981,220
Changes in estimated liability for warranties issued in prior years 245,300
Payments made under warranties (1,209,420)
----------

Ending balance $1,323,700
==========

CRITICAL ACCOUNTING POLICIES

Allowance for doubtful accounts. The Company maintains a reserve to absorb
probable losses relating to bad debts arising from uncollectible accounts
receivable. The allowance for doubtful accounts is maintained at a level the
Company considers to be adequate to absorb probable bad debts inherent in the
accounts receivable balance and is based on ongoing assessments and evaluations
of the collectibility, historical loss experience of accounts receivable and the
financial status of customers with accounts receivable balances. Bad debts are
charged and recoveries are credited to the reserve. Provision for bad debts are
based on the Company's review of the historical loss experience and such
factors, which in management's judgment, deserve consideration under existing
economic conditions in estimating probable losses.

We believe the accounting estimate related to the allowance for doubtful
accounts is a "critical accounting estimate" because the Company has a
significant concentration of accounts receivables from five customers (66% of
total accounts receivable at December 28, 2002), the economic conditions could
affect the Company's customers ability to pay and changes in the estimate could
have a material effect on net income. The estimate for the allowance for
doubtful accounts is a critical accounting estimate for both segments.

The Company utilizes credit reporting services specializing in its business
segments, participates in credit management associations pertaining to its
business segments, monitors accounts closely for current financial information
and performs internal risk analysis when making large credit decisions. The
Company has not substantively changed any aspect to its overall approach in the
determination of the allowance for bad debts. There have been no material
changes in assumptions or estimation techniques as compared to prior periods
that impacted the determination of the current period allowance.

Based on the procedures discussed above, management is of the opinion that the
reserve of $549,895 was adequate, but not excessive, to absorb estimated credit
losses associated with the accounts receivable balance at December 28, 2002.

EFFECT OF INFLATION

The Company cannot accurately determine the precise effects of inflation;
however, there were some increases in sales and costs due to inflation in 2002.
The Company attempts to pass on increased costs and expenses through price
increases when necessary. The Company is working on reducing expense levels,
improving manufacturing technologies and redesigning products to keep these
costs under control.

(13)

CAPITAL EXPENDITURES

As of December 28, 2002, the Company had no material commitments for capital
expenditures.

FORWARD-LOOKING STATEMENTS

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, the impact of competitive products and pricing,
product demand and market acceptance, new product development, the continuation
and development of key customer and supplier relationships, Escalade's ability
to control costs, general economic conditions, fluctuation in operating results,
changes in the securities market 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.

ITEM 7. A.--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by Item 8 are set forth
in Part IV, Item 14.

ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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 April 26, 2003 under the
captions "Certain Beneficial Owners" and "Election of Directors" 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
April 26, 2003 under the caption "Executive Compensation" and is incorporated
herein by reference, except that the information required by Items 402(k) and
(l) of Regulation S-K which appear within such caption under the sub-headings
"Compensation and Stock Option Committees", "Report of Audit Committee" and
"Financial Performance" are 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.

(14)

ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

EQUITY COMPENSATION PLAN INFORMATION

NUMBER OF WEIGHTED-AVERAGE
SECURITIES TO BE ISSUED EXERCISE PRICE NUMBER OF
UPON EXERCISE OF OF OUTSTANDING OPTIONS, SECURITIES REMAINING
OUTSTANDING OPTIONS, WARRANTS AVAILABLE FOR FUTURE
PLAN CATEGORY WARRANTS AND RIGHTS AND RIGHTS ISSUANCE
- ------------- ----------------------- ----------------------- --------------------

Equity compensation plans approved by security
holders (1) 298,375 9.25 743,345
Equity compensation plans not approved by
security holders 0 0 0
------- -------
Total 298,375 743,345
======= =======

(1) These plans are the Company's 1997 Incentive Stock Option Plan and the
1997 Director Stock Option Plan.

ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14--CONTROLS AND PROCEDURES

The Company 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 Rule 13a-14(c). In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can 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. Also, the Company has
investment in certain unconsolidated entities. As the Company does not control
or manage these entities, its disclosure controls and procedures with respect to
such entities are necessarily substantially more limited than those it maintains
with respect to its consolidated subsidiaries.

Within 90 days prior to the date of this report, 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 the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. 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.

There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date the Company completed its evaluation. Therefore, no corrective
actions were taken.

(15)

PART IV

ITEM 15--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) Documents filed as a part of this report:

(1) FINANCIAL STATEMENTS

Independent Accountants' Report

Consolidated financial statements of Escalade, Incorporated
and subsidiaries:
Consolidated balance sheets--December 28, 2002 and
December 29, 2001
Consolidated statements of income--fiscal years ended
December 28, 2002, December 29, 2001 and
December 30, 2000
Consolidated statements of stockholders' equity--fiscal
years ended December 28 2002, December 29, 2001 and
December 30, 2000
Consolidated statements of cash flows--fiscal years ended
December 28, 2002, December 29, 2001 and
December 30, 2000
Notes to consolidated financial statements

(2) FINANCIAL STATEMENT SCHEDULES

Independent Accountants' Report on financial statement schedule
For the three-year period ended December 28, 2002:
Schedule II--Valuation and qualifying accounts

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

3.1 Articles of incorporation of Escalade, Incorporated
(a)

3.2 By-Laws of Escalade, Incorporated (a)

4.1 Form of Escalade, Incorporated's common stock
certificate (a)

10.1 Licensing agreement between Sweden Table Tennis AB
and Indian Industries, Inc. dated January 1,
1995 (e)

10.2 Amended and Restated Credit Agreement dated October
24, 2001 between Escalade, Incorporated and Bank
One, Indiana, N.A. dated August 29, 2002 (j)

10.3 First Amendment to Amended and Restated Credit
Agreement dated October 24, 2001 between
Escalade, Incorporated and Bank One, Indiana,
N.A. dated August 29, 2002 (l)

10.4 Credit Agreement dated as of May 15, 2000 by and
between Indian-Martin AG and Bank One, Indiana,
National Association (excluding exhibits and
schedules not deemed to be material) dated July
3, 2002 (h)

10.5 Third Amendment to Credit Agreement dated as of May
15, 2000 by and between Indian-Martin AG and
Bank One, Indiana, National Association
(excluding exhibits and schedules not deemed to
be material) dated July 3, 2002 (k)

10.6 Revolving Note dated as of May 14, 2001 in principal
amount of $30,000,000 executed by Indian-Martin
AG in favor of Bank One, Indiana, National
Association (i)

10.7 Pledge Agreement dated as of May 15, 2000 by
Indian-Martin AG in favor of Bank One, Indiana,
National Association (h)

10.8 Collateral Agreement and Security Agreement dated as
of May 15, 2000 by Indian-Martin AG in favor of
Bank One, Indiana, National Association (h)

(16)

(3) EXHIBITS (continued)

10.9 Receivables Purchase Agreement dated as of May 15,
2000 between Indian-Martin AG and Indian
Industries, Inc. Substantially similar
Receivables Purchase Agreements were also
entered into by each of the Registrant's other
domestic operating subsidiaries, Harvard Sports,
Inc., Martin Yale Industries, Inc. and Master
Products Manufacturing Company, Inc., with
Indian-Martin AG (h)

10.10 Services Agreement dated as of May 15, 2000 between
Indian-Martin AG and Indian Industries, Inc.
Substantially similar Services Agreements were
also entered into by each of the Registrant's
other domestic operating subsidiaries, Harvard
Sports, Inc., Martin Yale Industries, Inc. and
Master Products Manufacturing Company, Inc.,
with Indian-Martin AG (h)

10.11 Subordinated Promissory Note dated as of May 15, 2000
in principal amount of $5,086,501 executed by
Indian Industries, Inc. in favor of
Indian-Martin AG. Substantially similar
Subordinated Promissory Notes were also entered
into by each of the Registrant's other domestic
operating subsidiaries, Harvard Sports, Inc.,
Martin Yale Industries, Inc. and Master Products
Manufacturing Company, Inc., with Indian-Martin
AG in the respective principal amounts of
$1,343,202, $3,130,191 and $3,593,149 (h)

10.12 Standby and Subordination Agreement dated as of May
15, 2000 among Bank One, Indiana, National
Association, Indian-Martin AG and Indian
Industries, Inc. Substantially similar Standby
and Subordination Agreements were also entered
into by each of the Registrant's other domestic
operating subsidiaries, Harvard Sports, Inc.,
Martin Yale Industries, Inc. and Master Products
Manufacturing Company, Inc. with Indian-Martin
AG and Bank One, Indiana, National Association
(h)

10.13 Promissory Note dated as of May 15, 2000 in principal
amount of $13,153,045 executed by Escalade,
Incorporated in favor of Indian-Martin AG (h)

10.14 Escalade Subordination Agreement dated as of May 15,
2000 between Escalade, Incorporated and Bank
One, Indiana, National Association (h)

10.15 Offset Waiver Agreement dated as of May 15, 2000
among Escalade, Incorporated and Bank One,
Indiana, National Association, Indian-Martin AG,
Indian Industries, Inc., Harvard Sports, Inc.,
Martin Yale Industries, Inc. and Master Products
Manufacturing Company, Inc. (h)

10.16 Loan Agreement dated September 1, 1998 between Martin
Yale Industries, Inc. and City of Wabash,
Indiana (g)

10.17 Trust Indenture between the City of Wabash, Indiana
and Bank One Trust Company, NA as Trustee dated
September 1, 1998 relating to the Adjustable
Rate Economic Development Revenue Refunding
Bonds, Series 1998 (Martin Yale Industries, Inc.
Project) (g)

10.18 Real Estate Sales Contract dated September 17, 1990
between Martin Yale Industries, Inc. and
Fritkin-Jones Design Group, Inc. (c)

(17)

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

10.19 The Harvard Sports/Indian Industries, Inc. 401(k)
Plan as amended and merged in 1993 (d)

10.20 Martin Yale Industries, Inc. 401(k) Retirement Plan
as amended in 1993 (d)

10.21 Incentive Compensation Plan for Escalade,
Incorporated and its subsidiaries (a)

10.22 Example of contributory deferred compensation
agreement between Escalade, Incorporated and
certain management employees allowing for
deferral of compensation (a)

10.23 1997 Director Stock Compensation and Option Plan (f)

10.24 1997 Incentive Stock Option Plan (f)

************* 21 Subsidiaries of the Registrant

************* 23 Consent of BKD, LLP

99.1 Certification of Chief Executive Officer

99.2 Certification of Chief Financial Officer

(a) Incorporated by reference from the Company's Form S-2 Registration
Statement, File No. 33-16279, as declared effective by the
Securities and Exchange Commission on September 2, 1987

(b) Incorporated by reference from the Company's 1988 Annual Report on
Form 10-K

(c) Incorporated by reference from the Company's 1990 Annual Report on
Form 10-K

(d) Incorporated by reference from the Company's 1993 Annual Report on
Form 10-K

(e) Incorporated by reference from the Company's 1995 Annual Report on
Form 10-K

(f) Incorporated by reference from the Company's 1997 Proxy Statement

(g) Incorporated by reference from the Company's 1998 Third Quarter
Report on Form 10-Q

(h) Incorporated by reference from the Company's 2000 Second Quarter
Report on Form 10-Q

(i) Incorporated by reference from the Company's 2001 Second Quarter
Report on Form 10-Q

(j) Incorporated by reference from the Company's 2001 Third Quarter
Report on Form 10-Q

(k) Incorporated by reference from the Company's 2002 Second Quarter
Report on Form 10-Q

(l) Incorporated by reference from the Company's 2002 Third Quarter
Report on Form 10-Q

(B) No reports on Form 8-K for the fourth quarter ended December 28, 2002 were
required to be filed.

(18)

[LOGO OG BKD LLP]

INDEPENDENT ACCOUNTANTS' REPORT

To the Stockholders and Board of Directors
Escalade, Incorporated
Evansville, Indiana

We have audited the accompanying consolidated balance sheets of Escalade,
Incorporated and subsidiaries as of December 28, 2002 and December 29, 2001 and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 28, 2002. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Escalade, Incorporated and subsidiaries at December 28, 2002 and December 29,
2001 and the results of their operations and their cash flows for each of the
three years in the period ended December 28, 2002 in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 5, in 2002 the Company changed its method of accounting for
goodwill and other intangible assets.

BKD, LLP

Evansville, Indiana
January 31, 2003

(F-1)

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 28 AND DECEMBER 29 2002 2001
- --------------------------- ------------ ------------

ASSETS
Current assets
Cash and cash equivalents $ 3,369,854 $ 920,271
Receivables, less allowances of $549,895 and $513,998 34,140,951 27,267,675
Inventories 20,549,569 17,292,841
Prepaid expenses 542,009 164,260
Deferred income tax benefit 814,650 901,589
------------ ------------
Total current assets 59,417,033 46,546,636

Property, plant and equipment 9,059,566 10,205,808
Intangible assets 6,491,777 1,298,812
Goodwill 13,350,707 12,760,707
Other assets 8,469,059 5,298,567
------------ ------------

$ 96,788,142 $ 76,110,530
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable--bank $ 11,223,317 $ 9,770,142
Current portion of long-term debt 166,667 166,667
Trade accounts payable 2,792,945 2,605,744
Accrued liabilities 17,003,936 18,748,421
Income tax payable 1,189,113 1,682,089
------------ ------------
Total current liabilities 32,375,978 32,973,063
------------ ------------

Other liabilities
Long-term debt 17,200,001 7,466,668
Deferred compensation 1,336,744 1,274,991
------------ ------------
18,536,745 8,741,659
------------ ------------
Stockholders' equity
Preferred stock
Authorized--1,000,000 shares, no par value, none issued
Common stock
Authorized--10,000,000 shares, no par value
Issued and outstanding--2002--6,508,856 shares,
2001--6,424,092 shares 6,508,856 6,424,092
Retained earnings 38,708,931 27,570,478
Additional paid-in capital 681,806 276,562
Accumulated other comprehensive income (loss) (24,174) 124,676
------------ ------------
45,875,419 34,395,808
------------ ------------

$ 96,788,142 $ 76,110,530
============ ============

See notes to consolidated financial statements.

(F-2)

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 28, DECEMBER 29
AND DECEMBER 30 2002 2001 2000
- ------------------------------------ ------------ ------------ ------------

Net Sales $155,455,346 $148,853,164 $116,081,388
------------ ------------ ------------

Costs, Expenses and Other Income
Cost of products sold 111,164,265 106,921,336 79,319,747
Selling, administrative and general expenses 26,328,342 21,849,920 20,253,094
Amortization of goodwill 862,045 829,675
Interest 950,824 1,359,194 2,092,438
Other expense 69,325 430,318 312,130
------------ ------------ ------------
138,512,756 131,422,813 102,807,084
------------ ------------ ------------

Income Before Income Taxes 16,942,590 17,430,351 13,274,304

Provision for Income Taxes 5,804,137 6,291,517 5,173,720
------------ ------------ ------------

NET INCOME $ 11,138,453 $ 11,138,834 $ 8,100,584
============ ============ ============

Per Share Data
Basic earnings per share $ 1.72 $ 1.73 $ 1.14
============ ============ ============

Diluted earnings per share $ 1.66 $ 1.68 $ 1.14
============ ============ ============

See notes to consolidated financial statements.

(F-3)

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

ACCUMULATED
OTHER
COMMON STOCK ADDITIONAL COMPREHENSIVE
-------------------- COMPREHENSIVE RETAINED PAID-IN INCOME
SHARES AMOUNT INCOME EARNINGS CAPITAL (LOSS) TOTAL
------ ------ ------------- -------- ---------- ------------- -----

BALANCES AT DECEMBER 25, 1999 2,918,178 $ 2,918,178 $26,318,825 $ 201,001 $ 29,438,004

Comprehensive income
Net income $ 8,100,584 8,100,584 8,100,584
Unrealized losses on
securities, net
of tax (4,252) (4,252) (4,252)
-----------
Comprehensive income $ 8,096,332
===========
Exercise of stock options 1,743 1,743 $ 15,469 17,212
Stock issued under the
Director Stock Option
Plan 6,144 6,144 90,240 96,384
Purchase of stock (760,203) (760,203) (12,927,705) (13,687,908)
--------- ------------ ----------- ----------- ----------- ------------

BALANCES AT DECEMBER 30, 2000 2,165,862 2,165,862 21,491,704 105,709 196,749 23,960,024

Comprehensive income
Net income $11,138,834 11,138,834 11,138,834
Unrealized losses on
securities, net
of tax (72,073) (72,073) (72,073)
-----------
Comprehensive income $11,066,761
===========
Exercise of stock options 32,264 32,264 434,273 466,537
Stock issued under the
Director Stock Option
Plan 6,586 6,586 101,534 108,120
Purchase of stock (63,348) (63,348) (777,332) (364,954) (1,205,634)
Stock split 4,282,728
Restatement of common
stock to $1 per share 4,282,728 (4,282,728)
--------- ------------ ----------- ----------- ----------- ------------

BALANCES AT DECEMBER 29, 2001 6,424,092 6,424,092 27,570,478 276,562 124,676 34,395,808

Comprehensive income
Net income $11,138,453 11,138,453 11,138,453
Unrealized losses on
securities, net
of tax (148,850) (148,850) (148,850)
-----------
Comprehensive income $10,989,603
===========
Exercise of stock options 95,984 95,984 441,107 537,091
Stock issued under the
Director Stock Option
Plan 11,426 11,426 68,210 79,636
Purchase of stock (22,646) (22,646) (104,073) (126,719)
--------- ------------ ----------- ----------- ----------- ------------

BALANCES AT DECEMBER 28, 2002 6,508,856 $ 6,508,856 $38,708,931 $ 681,806 $ (24,174) $ 45,875,419
========= ============ =========== =========== =========== ============

See notes to consolidated financial statements.

(F-4)

ESCALADE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 28, DECEMBER 29 AND DECEMBER 30 2002 2001 2000
- ---------------------------------------------------- ------------ ------------ ------------

OPERATING ACTIVITIES
Net income $ 11,138,453 $ 11,138,834 $ 8,100,584
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 3,797,763 3,592,622 3,178,721
Provision for doubtful accounts 100,837 40,705 141,136
Deferred income taxes (14,420) (314,460) (285,590)
Provision for deferred compensation 116,753 111,866 109,972
Deferred compensation paid (55,000) (35,000) (187,192)
(Gain) loss on disposals of assets (303,697) 134,724 25,651
Changes in
Accounts receivable (6,974,113) (521,450) (1,775,023)
Inventories (1,003,728) 860,521 (3,156,221)
Prepaids (377,748) (27,407) (10,548)
Other assets (500,328) (48,915) 933,576
Income tax payable (492,976) (293,263) 665,859
Accounts payable and accrued expenses (1,557,284) 4,979,056 3,792,662
------------ ------------ ------------
Net cash provided by operating activities 3,874,512 19,617,833 11,533,587
------------ ------------ ------------

INVESTING ACTIVITIES
Premiums paid for life insurance (32,500) (32,500) (150,000)
Change in cash surrender value, net of loans and premiums 46,591 36,385 267,129
Purchase of property and equipment (3,084,962) (2,738,548) (915,667)
Purchase of long-term investments (15,000) (59,500) (67,470)
Purchase of certain Lifetime Products assets (1,400,000)
Purchase of certain additional Mead Hatcher assets (600,000)
Purchase of Accudart (1,966,341)
Purchase of U. S. Weight (5,889,194)
Purchase of certain assets of Murrey and Sons (2,489,000)
Purchase of certain assets of Steve Mizerak, Inc. (1,229,000)
Purchase of all assets relating to The Step product line (4,840,000)
Proceeds from sale of property and equipment 1,699,173
Equity investment in Schleicher & Co. International AG (2,556,747)
------------ ------------ ------------
Net cash used by investing activities (13,101,445) (10,649,698) (2,266,008)
------------ ------------ ------------

FINANCING ACTIVITIES
Net increase (decrease) in notes payable--bank 1,453,175 (3,496,993) 3,697,463
Proceeds from exercise of stock options 616,727 574,657 113,596
Reduction of long-term debt (5,166,667) (5,900,000) (10,500,000)
Purchase of stock (126,719) (1,205,634) (13,687,908)
Proceeds from long-term debt 14,900,000 833,335 10,500,000
------------ ------------ ------------
Net cash provided (used) by financing activities 11,676,516 (9,194,635) (9,876,849)
------------ ------------ ------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,449,583 (226,500) (609,270)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 920,271 1,146,771 1,756,041
------------ ------------ ------------

CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,369,854 $ 920,271 $ 1,146,771
============ ============ ============

SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid $ 952,175 $ 1,480,140 $ 2,067,494
Income taxes paid, net 6,831,000 7,121,546 3,190,000
Fixed assets in accounts payable 68,781 25,000

See notes to consolidated financial statements.

(F-5)

ESCALADE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Escalade, Incorporated (Company) is primarily engaged in the manufacture and
sale of sporting goods and office and graphic arts products. The Company is
located in Evansville, Indiana and has five manufacturing facilities, one in
Evansville, Indiana; Wabash, Indiana; Olney, Illinois and two in Tijuana,
Mexico. The Company sells products to customers throughout the world.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
all majority-owned subsidiaries, Indian Industries, Inc., Martin Yale
Industries, Inc., Harvard Sports, Inc., Master Products Manufacturing Company,
Inc., Indian-Martin AG, EIM Company, Inc., SOP Services, Inc. and U. S. Weight,
Inc. All material intercompany accounts and transactions have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of bank deposits in federally insured
accounts.

For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments; if any, purchased with an original maturity of three
months or less to be cash equivalents.

INVENTORIES

Inventories are valued at the lower of cost or market. Cost is based on the
first-in, first-out (FIFO) method.

ACCOUNTS RECEIVABLE

Accounts receivable are stated at the amount billed to customers. The Company
provides an allowance for doubtful accounts, which is 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 past due more than 90 days are considered
delinquent. Delinquent receivables are written off based on individual credit
evaluation and specific circumstances of the customer.

INVESTMENTS

The Company has long-term marketable equity securities, which are included in
other assets on the consolidated balance sheet and are recorded at fair value
with unrealized gains and losses reported, net of tax, in accumulated other
comprehensive income.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost. Depreciation and
amortization are computed by the straight-line and double declining balance
methods.

(F-6)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated useful lives used in computing depreciation are as follows:

YEARS
-----

Buildings 20-30
Leasehold improvements 4-8
Machinery and equipment 5-15
Tooling, dies and molds 2-4

EMPLOYEE STOCK OPTION PLAN

At December 31, 2002, the Company has a stock-based employee compensation plan,
which is described more fully in Note 10. The Company accounts for this plan
under the recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock issued to Employees, and related interpretations. The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation.

YEARS ENDED DECEMBER 28, DECEMBER 29 AND DECEMBER 30 2002 2001 2000
- ---------------------------------------------------- ----------- ----------- ----------

Net income, as reported $11,138,453 $11,138,834 $8,100,584
Less: Total stock-based employee compensation cost
determined under the fair value based method, net of
income taxes (404,424) (208,216) (136,940)
----------- ----------- ----------

Pro forma net income $10,734,029 $10,930,618 $7,963,644
=========== =========== ==========

Earnings per share
Basic--as reported $ 1.72 $ 1.73 $ 1.14
=========== =========== ==========
Basic--pro forma $ 1.65 $ 1.70 $ 1.12
=========== =========== ==========
Diluted--as reported $ 1.66 $ 1.68 $ 1.14
=========== =========== ==========
Diluted--pro forma $ 1.59 $ 1.65 $ 1.12
=========== =========== ==========

INVESTMENT IN AFFILIATE

The investment in a 22%-owned affiliate, Schleicher & Co. International AG
(Schleicher) is stated at amortized cost plus equity in the affiliates'
undistributed net income since acquisition. At December 28, 2002, the Company's
investment in Schleicher totaled $2,595,192. This amount is included in other
assets in the consolidated balance sheets.

FINANCIAL INSTRUMENTS

The carrying values of all of the Company's financial instruments approximate
their fair values.

(F-7)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

Earnings per share have been computed based upon the weighted average-common
shares outstanding during each year.

FISCAL YEAR END

The Company's fiscal year ends on the Saturday nearest December 31, within the
calendar year.

PRODUCT WARRANTY

The Company provides for the estimated cost of its warranty obligations at the
time of the sale.

EMPLOYEE BENEFITS

The Company has an employee profit-sharing salary reduction plan, pursuant to
the provisions of Section 401(k) of the Internal Revenue Code, for non-union
employees. It is the Company's policy to fund costs accrued on a current basis.

INCOME TAXES

Income tax in the consolidated statement of income includes deferred income tax
provisions or benefits for all significant temporary differences in recognizing
income and expenses for financial reporting and income tax purposes.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to expense as incurred. The research
and development costs incurred during 2002, 2001 and 2000 were approximately
$1,520,000, $2,150,000 and $1,700,000.

INTANGIBLE ASSETS

The Company has various intangible assets including consulting, patents,
trademarks and noncompetition agreements and goodwill. Amortization is computed
using the straight-line method over the following lives:

YEARS
-----

Consulting agreements 1
Non-compete agreements 5
Patents 8
Trademarks 15

REVENUE RECOGNITION

Revenue from the sale of the Company's products is recognized as products are
shipped to customers.

SELF INSURANCE

The Company has elected to act as a self-insurer for certain costs related to
employee health and accident benefit programs. Costs resulting from non-insured
losses are charged to income when incurred. The Company has purchased insurance
which limits its exposure for individual claims and which limits its aggregate
exposure to $1,400,000.

RECLASSIFICATIONS

Certain reclassifications have been made to the 2001 financial statements to
conform to the 2002 financial statement presentation. These reclassifications
had no effect on net earnings.

(F-8)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, SFAS No. 142, Goodwill and Other Intangible Assets, was issued.
This statement discontinued the practice of amortizing goodwill and indefinite
lived intangible assets and initiated an annual review for impairment.
Impairment is to be examined more frequently if certain indicators are
encountered. The Company has completed the initial and the annual goodwill
impairment test required by this standard and has determined that no impairment
exists. Intangible assets with a determinable useful life will continue to be
amortized over that period. The Company adopted the amortization provisions of
SFAS No. 142 effective December 30, 2001. The effect of the elimination of
goodwill amortization increased net income by approximately $866,000 in 2002.

The pro forma after-tax effect of the elimination of goodwill amortization as if
SFAS No. 142 had been effective in 2001 and 2000, was approximately $827,000 and
$795,000, respectively.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. Adoption of
this standard is not expected to have a material effect on the Company's
Consolidated Financial Statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement eliminates the allocation of
goodwill to long-lived assets to be tested for impairment and details both a
probability-weighted and "primary-asset" approach to estimate cash flows in
testing for impairment of a long-lived asset. SFAS No. 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001.
Adoption of this standard did not have a material effect on the Company's
Consolidated Financial Statements.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. This statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). This statement requires
recognition of a liability for a cost associated with an exit or disposal
activity when the liability is incurred, as opposed to being recognized at the
date an entity commits to an exit plan. This statement also establishes that
fair value is the objective for initial measurement of the liability. This
statement is effective for exit or disposal activities that are initiated after
December 31, 2002. Adoption of this standard is not expected to have a material
effect on the Company's Consolidated Financial Statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure--an Amendment of FASB Statement No. 123.
This statement provides alternative methods of transition for a voluntary change
to the fair value method of accounting for stock-based employee compensation.
This statement is effective for financial statements for fiscal years ending
after December 15, 2002. As permitted by SFAS No. 148, the Company will continue
to apply the provisions of APB Opinion No. 25, Accounting for Stock-Based
Compensation, for all employee stock option grants and provide all disclosures
required. In addition, the Company is awaiting further guidance and clarity that
may result from current FASB stock compensation projects and will continue to
evaluate any developments concerning mandated, as opposed to optional,
fair-value based expense recognition.

(F-9)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In November 2002, the FASB issued Interpretation No. 45, (FIN 45), Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which elaborates on the disclosures to be
made by a guarantor about its obligations under certain guarantees issued. It
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and measurement provisions of
this Interpretation apply on a prospective basis to guarantees issued or
modified after December 31, 2002. The disclosure requirements in this
Interpretation are effective for periods ending after December 15, 2002. The
Company has product warranties that fall under the scope of FIN 45. Adoption of
the requirements of FIN 45 is not expected to have a material effect on the
Company's Consolidated Financial Statements.

The Company provides limited warranties on certain of its products, for periods.
Generally, the warranty periods range from 90 days to one year. The Company
provides a seven-year warranty on the slatron bed component of its billiards
tables, a ten-year warranty on the slate bed component of its billiards tables
and a lifetime warranty on the structure of the pole on its Goalrilla(TM) and
Goaliath(R) basketball goals. The Company records an accrued liability and
expense 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 expense in the current year. A reconciliation of the
liability is as follows:

YEAR ENDED DECEMBER 28 2002
- ---------------------- -----------

Beginning balance $ 1,306,600
Changes in liability for product warranties issued 981,220
Changes in estimated liability for warranties issued in prior years 245,300
Payments made under warranties (1,209,420)
-----------
Ending balance $ 1,323,700
===========

NOTE 2 -- INVENTORIES

Inventories consist of the following:

DECEMBER 28 AND DECEMBER 29 2002 2001
- --------------------------- ------------ ------------

Finished products $ 10,263,331 $ 8,713,656
Work in process 4,536,086 4,110,376
Raw materials and supplies 5,750,152 4,468,809
------------ ------------

$ 20,549,569 $ 17,292,841
============ ============

NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

DECEMBER 28 AND DECEMBER 29 2002 2001
- --------------------------- ------------ ------------

Land $ 300,705 $ 712,705
Buildings and leasehold improvements 10,071,426 10,630,847
Machinery and equipment 24,885,698 22,641,560
------------ ------------
Total cost 35,257,829 33,985,112
Accumulated depreciation and amortization (26,198,263) (23,779,304)
------------ ------------
$ 9,059,566 $ 10,205,808
============ ============

(F-10)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 -- LINE OF CREDIT

The Company's directly owned subsidiary, Indian-Martin AG, has a revolving line
of credit under which it will borrow funds from time to time to purchase
eligible accounts receivable from Escalade's operating subsidiaries which
accounts are and will be pledged to secure those borrowings. At December 28,
2002, this line of credit aggregated $30,000,000, of which $11,223,317 was
borrowed. The interest rate on the line of credit is at the Bank One
Indianapolis, N.A. prime rate minus 1.25% (or 3.00%). A LIBOR option is also
available for the interest rate. At December 28, 2002, $5,000,000 of this line
of credit was at a LIBOR option rate of 2.80%.

NOTE 5 -- ACQUIRED INTANGIBLE ASSETS AND GOODWILL

The carrying basis and accumulated amortization of recognized intangible assets
were:

2002 2001
-------------------------------------------------------
GROSS GROSS
CARRYING ACCUMULATED CARRYING ACCUMULATED
DECEMBER 28 AND DECEMBER 29 AMOUNT AMORTIZATION AMOUNT AMORTIZATION
- --------------------------- -------- ------------ -------- ------------

Amortized intangible assets
Patents $4,720,000 $ 585,470
Consulting agreements 810,000 660,000 $ 710,000 $ 510,000
Non-compete agreements 1,700,000 880,115 1,300,000 591,744
Trademarks 1,508,750 121,388 423,750 33,194
---------- ---------- ---------- ----------

$8,738,750 $2,246,973 $2,433,750 $1,134,938
========== ========== ========== ==========

Amortization expense for the years ended December 28, 2002, December 29, 2001
and December 30, 2000, was $1,112,035, $360,694 and $161,250, respectively.
Estimated amortization expense for each reporting segment for each of the
following five years is:

SPORTING GOODS
AND FITNESS OFFICE AND
PRODUCTS GRAPHIC ARTS TOTAL
-------------- ------------ -----

2003 $1,037,942 $19,244 $1,057,186
2004 1,030,250 1,030,250
2005 877,942 877,942
2006 802,942 802,942
2007 741,275 741,275
Thereafter 2,021,426 2,021,426
---------- ------- ----------

$6,511,777 $19,244 $6,531,021
========== ======= ==========

(F-11)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in the carrying amount of goodwill were:

DECEMBER 28 AND DECEMBER 29 2002 2001
- --------------------------- ------------ ------------

Balance as of beginning of year $ 12,760,707 $ 10,899,032
Goodwill acquired during the year 590,000 2,723,720
Amortization (862,045)
------------ ------------

Balance as of end of year $ 13,350,707 $ 12,760,707
============ ============

Goodwill is allocated to the sporting goods and fitness products and office and
graphic arts segments of the business. Goodwill was allocated to its segments as
follows:

DECEMBER 28 AND DECEMBER 29 2002 2001
- --------------------------- ----------- -----------

Sporting goods and fitness products $ 7,150,791 $ 7,150,791
Office and graphic arts 6,199,916 5,609,916
----------- -----------

$13,350,707 $12,760,709
=========== ===========

Financial Accounting Standards Board Statement No. 142, Goodwill and Other
Intangibles, requires transitional disclosures regarding the change in
amortization and other treatment of goodwill and intangible assets for the years
ended December 29, 2001 and December 30, 2000, are as follows:

DECEMBER 29 AND DECEMBER 30 2001 2000
- --------------------------- ----------- -----------

Reported net income $11,138,834 $ 8,100,584
Add back: Goodwill amortization, net of tax 827,195 794,825
----------- -----------

Adjusted net income $11,966,029 $ 8,895,409
=========== ===========

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 141, Business Combinations, which
requires that the purchase method of accounting be used for all business
combinations completed after June 30, 2001. SFAS No. 141 specifies that certain
acquired intangible assets in a business combination be recognized as assets
separately from goodwill. Additionally, it requires the Company to evaluate its
existing intangible assets and goodwill and to make any necessary
reclassifications in order to conform with the new separation requirements at
the date of adoption. Goodwill and intangible assets determined to have
indefinite useful lives that are acquired in a business combination completed
after June 30, 2001 will not be amortized. Goodwill and intangible assets
acquired in business combinations completed before July 1, 2001 continued to be
amortized until December 29, 2001. With the exception of the immediate
requirement to use the purchase method of accounting for all future business
combinations completed after June 30, 2001, the Company was required to adopt
the provision of SFAS No. 141 on December 30, 2001.

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 requires that goodwill no longer be amortized but instead
be tested for impairment at least annually, and that intangible assets other
than goodwill should be amortized over their useful lives. The Company adopted
the provisions on December 30, 2001. The Company did not have any impairment of
goodwill or intangibles assets during 2002, 2001 or 2000. The effect of adopting
SFAS No. 142 was to increase 2002 net income by approximately $827,000.

(F-12)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 -- LONG-TERM DEBT

DECEMBER 28 AND DECEMBER 29 2002 2001
- --------------------------- ------------ ------------

Contract payable for Accudart acquisition, due $166,667 annually beginning
February 1, 2002 through February 1, 2006, non-interest bearing, secured by
a stand-by letter of credit $ 666,668 $ 833,335
Mortgage payable (Wabash, Indiana Adjustable Rate Economic
Development Revenue Refunding Bonds), annual installments
are optional, interest varies with short-term rates and is
adjustable weekly based on market conditions, maximum rate
is 10.00%, current rate is 1.35%, due September 2028, secured
by plant facility, machinery and equipment, and stand-by letter of credit 2,700,000 2,700,000
Revolving term loan of $25,000,000, the amount available under this revolving
term loan shall reduce by $5,000,000 annually starting March 31, 2002,
balance due March 31, 2006. At December 28, 2002, $9,000,000 of this
revolving term loan had an interest rate of prime minus .75% or 3.50% and
$5,000,000 had an interest rate of London Interbank Offered Rate (LIBOR)
plus 1.50% or 2.9313%, unsecured 14,000,000 4,100,000
------------ ------------
17,366,668 7,633,335
Portion classified as current (166,667) (166,667)
------------ ------------

$ 17,200,001 $ 7,466,668
============ ============

Maturities of long-term indebtedness for the ensuing five years are: 2003,
$166,667; 2004, $4,166,667; 2005, $5,166,667; 2006, $5,166,667 and thereafter,
$2,700,000.

The mortgages payable and term loan agreements contain certain restrictive
covenants, of which the more significant include maintenance of specified net
worth and maintenance of specified ranges of debt service and leverage ratios.

NOTE 7 -- INVESTMENTS

GROSS
UNREALIZED APPROXIMATE
AMORTIZED GAINS MARKET
COST (LOSSES) VALUE
---------- ---------- -----------

DECEMBER 28, 2002
Available for sale
Marketable equity securities (included in
other assets) $1,242,706 $ (40,289) $1,202,417
========== ========== ==========
DECEMBER 29, 2001
Available for sale
Marketable equity securities (included in
other assets) $1,257,706 $ 207,793 $1,465,499
========== ========== ==========

(F-13)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 -- STOCK OPTIONS

At the Company's 1997 annual meeting, the stockholders approved two Stock Option
Plans reserving 900,000 common shares for issuance under an Incentive Stock
Option Plan (ISO) and 300,000 common shares for issuance under a Director Stock
Option Plan (DSO). During 2002, 2001 and 2000, there were 77,100, 83,700 and
49,500 options granted under the ISO and there were 280,200, 310,762 and 264,783
options outstanding at each respective year end under this plan. During 2002,
2001 and 2000, there were 5,713, 6,207 and 9,216 options granted and 18,175,
18,585 and 24,078 options outstanding at each respective year end under the DSO.

Under the Company's ISO, which is accounted for in accordance with Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations, the Company grants selected executives and other
key employees' stock option awards which vest over four years of continued
employment. The exercise price of each option, which has a five-year life, was
equal to the market price of the Company's stock on the date of grant;
therefore, no compensation expense was recognized. Options are exercisable
commencing one year from the date of issuance to the extent vested.

Although the Company has elected to follow APB Opinion No. 25, Statement of
Financial Accounting Standards (SFAS) No. 123 requires pro forma disclosures of
net income and earnings per share as if the Company had accounted for its
employee stock options under that statement. The fair value of each option grant
was estimated on the grant date using an option pricing model with the following
assumptions:

2002 2001 2000
------- ------- -------

Risk-free interest rates 4.65% 4.76% 6.26%
Dividend yields 0% 0% 0%
Volatility factors of expected market price of common stock 38% 95% 45%
Weighted average expected life of the options 5 YEARS 5 years 5 years

(F-14)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock option transactions are summarized as follows:

2002 2001 2000
----------------- ----------------- -----------------
OPTION Option Option
SHARES PRICE Shares Price Shares Price
------ ----- ------ ----- ------ -----

Outstanding at beginning $3.29 TO $3.29 to $3.29 to
of year 329,347 7.19 288,861 7.00 240,699 7.00
$7.59 TO $5.83 to $4.83 to
Issued during year 82,813 18.06 89,907 7.19 58,716 5.23
Canceled or expired (6,375) (10,571) (4,950)
$3.29 TO $3.29 to
Exercised during year (107,410) 7.19 (38,850) 7.00 (5,604) $3.29
--------- -------- ------- -------- ------- --------

$4.83 TO $3.29 to $3.29 to
Outstanding at end of year 298,375 18.06 329,347 7.19 288,861 7.00
=======

Exercisable at end of year 112,737 143,805 106,515
======== ======= =======

Weighted-average fair value
of options granted during
the year $6.98 $5.36 $2.52
======== ======= =======

The following table summarizes information about fixed stock options outstanding
at December 28, 2002:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------------------------------- ----------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT 12/28/02 CONTRACTUAL LIFE EXERCISE PRICE AT 12/28/02 EXERCISE PRICE
--------------- ----------- ---------------- ---------------- ----------- ----------------

$ 4.83 - $7.59 221,275 2.2 years $ 4.83 - $7.59 112,737 $ 4.83 - $7.59
18.06 77,100 4.2 years 18.06 18.06
------- -------

298,375 112,737
======= =======

The incentive stock options granted in 2002 and 2001 are exercisable at the rate
of 25% over each of the four years beginning in 2003 and 2002.

5,713 Director Stock Options were issued during the year 2002 at an option price
of $7.59 and can be exercised after April 28, 2003 with an expiration date of
April 27, 2006.

(F-15)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 -- STOCKHOLDERS' EQUITY TRANSACTIONS

During 2000, the Company conducted a Dutch Auction self-tender offer whereby it
purchased 758,312 shares of its common stock at $18.00 per share.

The Company paid no cash dividends during 2002, 2001 or 2000.

NOTE 10 -- EARNINGS PER SHARE

Earnings per share (EPS) were computed as follows:

WEIGHTED- PER
AVERAGE SHARE
YEAR ENDED DECEMBER 28, 2002 INCOME SHARES AMOUNT
- ---------------------------- ------ --------- ------

Net Income $11,138,453
-----------
Basic Earnings per Share
Income available to common stockholders 11,138,453 6,486,081 $1.72
=====
Effect of Dilutive Securities
Stock options 231,071
----------- ---------
Diluted Earnings Per Share
Income available to common stockholders and
assumed conversions $11,138,453 6,717,152 $1.66
=========== ========= =====

YEAR ENDED DECEMBER 29, 2001
Net Income $11,138,834
-----------
Basic Earnings per Share
Income available to common stockholders 11,138,834 6,446,706 $1.73
=====
Effect of Dilutive Securities
Stock options 170,904
----------- ---------
Diluted Earnings Per Share
Income available to common stockholders and
assumed conversions $11,138,834 6,617,610 $1.68
=========== ========= =====
YEAR ENDED DECEMBER 30, 2000
Net Income $ 8,100,584
-----------
Basic Earnings per Share
Income available to common stockholders 8,100,584 7,082,712 $1.14
=====
Effect of Dilutive Securities
Stock options 30,549
----------- ---------
Diluted Earnings Per Share
Income available to common stockholders and
assumed conversions $ 8,100,584 7,113,261 $1.14
=========== ========= =====

(F-16)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 -- OPERATING LEASES

The Company leases warehousing and office space at its National City, California
facilities and the term of the lease is five years. The lease rate ranges from
$223,736 in year one to $272,971 in year five. The Company also shares in common
area expenses not to exceed 8(cent) per sq. ft. per month. The lease expires
January 31, 2006.

The Company leases warehousing space next to its Evansville facility for $18,554
per month. The lease expires on October 31, 2004. The Company has one two-year
renewal option followed by two five-year renewal options.

The Company leases manufacturing space in Tijuana, Mexico for its office
products operations for $26,240 per month. The lease expires on May 31, 2004.

The Company leases additional space in Tijuana, Mexico for its sporting goods
operations for $10,000 per month. The lease expires on December 31, 2005.

The Company leases manufacturing space in Olney, Illinois for its sporting goods
operations for $5,200 per month. The lease expires on June 1, 2003.

The Company leases additional warehousing space in Evansville for its sporting
goods operation for $11,500 per month. The lease expires on July 31, 2004.

At December 28, 2002, the minimum rental payments under noncancelable leases
with terms of more than one year are as follows:

YEARS ENDING AMOUNT
- ------------ ------

2003 $1,049,792
2004 806,158
2005 392,971
2006 24,981
----------

$2,273,902
==========

The following schedule shows the composition of total rental expense for
operating leases except those with terms of a month or less:

2002 2001 2000
---- ---- ----

Rentals $1,133,457 $714,560 $441,601
========== ======== ========

(F-17)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 -- INCOME TAXES

Provision for income taxes consists of the following:

YEARS ENDED DECEMBER 28, DECEMBER 29 AND DECEMBER 30 2002 2001 2000
- ---------------------------------------------------- ----------- ----------- -----------

Current
Federal $ 4,678,436 $ 5,383,564 $ 4,456,013
State 459,013 549,165 855,217
International 681,108 673,248 148,080
----------- ----------- -----------
5,818,557 6,605,977 5,459,310
----------- ----------- -----------
Deferred
Federal (10,862) (250,185) (226,759)
State (3,558) (64,275) (58,831)
----------- ----------- -----------
(14,420) (314,460) (285,590)
----------- ----------- -----------

$ 5,804,137 $ 6,291,517 $ 5,173,720
=========== =========== ===========

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:

YEARS ENDED DECEMBER 28, DECEMBER 29 AND DECEMBER 30 2002 2001 2000
- ---------------------------------------------------- ----------- ----------- -----------

Income tax at statutory rate $ 5,760,481 $ 5,926,319 $ 4,513,263
Increase (decrease) in income tax resulting from
Recurring permanent differences (goodwill
amortization, dividend exclusion, non-deductible
officers' life insurance expense and foreign income) (56,790) 75,979 188,314
State tax expense, net of federal effect 300,600 320,027 525,615
International taxes (681,108) 673,248 148,080
Foreign tax credit 681,108 (673,248) (148,080)
Research credit (102,089)
Other (98,065) (30,808) (53,472)
----------- ----------- -----------

Provision for income taxes recorded $ 5,804,137 $ 6,291,517 $ 5,173,720
=========== =========== ===========

At December 28, 2002, a cumulative deferred tax asset of $2,282,548 is included
in current assets and other assets. At December 29, 2001, a cumulative deferred
tax asset of $2,168,895 is included in current assets and other assets.

(F-18)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of the net deferred tax asset are as follows:

DECEMBER 28 AND DECEMBER 29 2002 2001
- --------------------------- ----------- -----------

ASSETS
Employee benefits $ 852,318 $ 812,828
Valuation reserves 536,185 664,566
Goodwill and intangible assets 64,779 216,405
Deferred compensation 496,898 472,587
Depreciation 316,253 85,627
Unrealized loss on securities available for sale 16,115
----------- -----------
Total assets 2,282,548 2,252,013

LIABILITIES--Unrealized gain on securities available for sale (83,118)
----------- -----------

$ 2,282,548 $ 2,168,895
=========== ===========

NOTE 13 -- 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 non-union
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 $461,196, $375,848 and $403,235 for 2002, 2001 and
2000.

NOTE 14 -- VOLUNTARY EMPLOYEE BENEFITS ASSOCIATION TRUST (VEBA)

The Company established a VEBA as a tax-exempt organization to provide life,
medical, disability and other similar welfare benefits permitted pursuant to
Internal Revenue Code Section 501(c)(9) for its employees.

(F-19)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 -- SEGMENT INFORMATION AND CONCENTRATIONS

YEARS ENDED DECEMBER 28, DECEMBER 29 AND DECEMBER 30 2002 2001 2000
- ---------------------------------------------------- --------- --------- ---------
(In Thousands)

Sales to unaffiliated customers
Sporting goods $ 126,745 $ 118,867 $ 79,948
Office and graphic arts products 28,710 29,986 36,133
--------- --------- ---------
Total consolidated $ 155,455 $ 148,853 $ 116,081
========= ========= =========

Segment profit
Sporting goods $ 8,400 $ 6,721 $ 3,520
Office and graphic arts products 3,029 3,534 5,022
Corporate (291) 884 (442)
--------- --------- ---------
Total consolidated $ 11,138 $ 11,139 $ 8,100
========= ========= =========

Interest expense
Sporting goods $ 881 $ 1,078 $ 890
Office and graphic arts products 95 84 55
Corporate (25) 197 1,147
--------- --------- ---------
Total consolidated $ 951 $ 1,359 $ 2,092
========= ========= =========

Gain (loss) on disposal of assets
Sporting goods $ (128) $ (135) $ (20)
Office and graphic arts products 432 (6)
--------- --------- ---------
Total consolidated $ 304 $ (135) $ (26)
========= ========= =========

Identifiable assets
Sporting goods $ 65,282 $ 47,762 $ 41,119
Office and graphic arts products 25,653 22,793 22,892
Corporate 5,853 5,556 5,465
--------- --------- ---------
Total assets $ 96,788 $ 76,111 $ 69,476
========= ========= =========

Depreciation and amortization
Sporting goods $ 2,746 $ 2,115 $ 1,715
Office and graphic arts products 1,052 1,477 1,464
--------- --------- ---------
Total consolidated $ 3,798 $ 3,592 $ 3,179
========= ========= =========

Capital expenditures
Sporting goods $ 2,450 $ 1,132 $ 754
Office and graphic arts products 635 1,607 187
--------- --------- ---------
$ 3,085 $ 2,739 $ 941
========= ========= =========

(F-20)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company operates principally in two industries, sporting goods and office
and graphic arts products. The Company sells its products primarily to retailers
and wholesalers located throughout the United States. Operations in the sporting
goods industry consist of production and sale of table tennis tables and
accessories, archery equipment, home pool tables and accessories, combination
bumper pool and card tables, game tables, basketball backboards, goals and
poles, darts, dart cabinets, vinyl weight sets and workout benches and aerobic
Step products. Operations in the office and graphic arts products industry
consist of production and sale of paper trimmers, paper folding machines, paper
drills, collators, decollators, bursting machines, letter openers, paper
joggers, checksigners, stamp affixers, paper punches, paper cutters, catalog
rack systems, bindery carts, business card slitters, thermography machines,
keyboard drawers, computer storage, copyholders, media retention systems,
posting trays and related accessories.

Identifiable assets are principally those assets used in each industry.
Corporate assets are principally cash and cash equivalents, deferred taxes,
marketable equity securities and the cash surrender value of life insurance.

In 2002, 2001 and 2000, approximately 47% (38% of consolidated sales), 46% (37%
of consolidated sales) and 45% (31% of consolidated sales) of the sporting goods
were sold to Sears, Roebuck & Co. At December 28, 2002, December 29, 2001 and
December 30, 2000, accounts receivable included $11,724,627, $5,839,366 and
$11,323,174 due from Sears, Roebuck & Co.

Approximately 30% of the Company's labor force is covered by a collective
bargaining agreement. Management acknowledges that there usually will be
differences between Company offers and union demands during negotiations.
However, management has no reason to expect such differences to result in
protracted conflict. The current contract expires on April 27, 2003.

Raw materials for Escalade's various product lines consist of wood,
particleboard, slate, standard grades of steel, steel tubing, plastic, vinyl,
steel cables, fiberglass and packaging. Escalade relies upon suppliers in Europe
and Brazil for its requirement of billiard balls and slate utilized in the
production of home pool tables and upon various Asian manufacturers for certain
of its table tennis needs and other items. Escalade sources some of its game
table product line in China.

Consolidated assets include approximately $4.7 million of assets located in
Mexico, which includes equipment and inventory and $34.6 million of assets
located in Switzerland, which includes accounts receivable.

(F-21)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 -- CERTAIN SIGNIFICANT ESTIMATES

Management's estimates that influence the financial statements are normally
based on knowledge and experience about past and current events and assumptions
about future events. The following estimates affecting the financial statements
are particularly sensitive because of their significance, and it is at least
reasonably possible that a change in these estimates will occur in the near
term:

Product warranty reserves--based on an analysis of customers' product
return histories, current status, sales volume and management's
expectations from new products introduced into the market.

Customer allowance reserves--based on agreements for customer purchase
rebates and shared advertising, and prior year's shipments.

Inventory valuation reserves--based on estimates of costs of inventory
amounts overstocked or obsolete in excess of realizable value.

NOTE 17 -- ADDITIONAL INFORMATION

DECEMBER 28 AND DECEMBER 29 2002 2001
- --------------------------- ----------- -----------

Accrued Liabilities
Employees' compensation $ 5,855,979 $ 6,083,390
Payroll taxes and taxes withheld from employees'
compensation 277,611 335,376
Taxes other than taxes on income 93,478 375,170
Accrued interest 42,231 43,582
Customer volume discounts payable 8,143,877 8,277,224
Other accrued items 2,590,760 3,633,679
----------- -----------

$17,003,936 $18,748,421
=========== ===========

NOTE 18 -- DEFERRED COMPENSATION PLAN

In October 1985, the Board of Directors approved the adoption of a Contributory
Deferred Compensation Plan pursuant to which some recipients of incentive
compensation could elect to defer receipt thereof. For each dollar of deferred
compensation, the Company provided a 75% matching amount. Amounts deferred earn
interest at the rate of 9%. Such amounts are not intended to be recognized for
tax purposes until receipt. All deferrals allowed under this plan have been
made. Participants have no vested rights in deferred amounts credited to their
accounts and are general creditors of the Company until such amounts are
actually paid.

(F-22)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 -- COMMITMENTS AND CONTINGENCIES

At December 28, 2002, the Company has standby letters of credit issued by a bank
in the amount of $666,668.

Additionally, the Company has obtained a letter of credit for the benefit of
certain mortgage holders. At December 28, 2002, the balance of the letter of
credit was $2,733,750. It is to be used in the event of a default in either
interest or principal payments.

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 payments. At December 28, 2002, the Company had estimated royalty
payments for each of the following five years as follows:

2003 $ 405,000
2004 435,000
2005 140,000
2006 160,000
2007 60,000
----------

$1,200,000
==========

NOTE 20 -- SUMMARY OF QUARTERLY RESULTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
MARCH 23 JULY 13 OCTOBER 5 DECEMBER 28
-------- ------- --------- -----------

2002
Net sales $17,505 $32,202 $51,859 $53,889
Gross profit 5,171 10,623 15,173 13,324
Net income (68) 2,603 4,149 4,454
Basic earnings per share (.01) .40 .64 .68

2001 (.01)
Net sales $18,496 $27,759 $54,423 $48,175
Gross profit 5,786 8,960 14,691 12,495
Net income 634 1,578 4,040 4,887
Basic earnings per share .10 .24 .63 .76

(F-23)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21 -- ACQUISITIONS

ACQUISITION OF LIFETIME PRODUCTS, INC.

On January 5, 2000, Indian Industries acquired certain assets of the table
tennis business of Lifetime Products, Inc., a Utah corporation, who wished to
discontinue its table tennis business. Those assets consisted mainly of
machinery, equipment and tooling and are being relocated to Indian's Evansville
Indiana facility. The cost of the purchase was $1,400,000, which was paid on
January 5, 2000.

ACQUISITION OF ACCUDART CORPORATION

On February 5, 2001, Escalade Sports acquired substantially all of the assets of
Accudart Corporation for cash. The purchased assets, included inventory,
equipment and intellectual property. Accudart is a leading name in darts. The
cost of the purchase was $1,966,341. Winmau(R), a leading name in dartboards,
will be distributed in the U.S.A. exclusively by Escalade Sports as part of the
purchase agreement.

ACQUISITION OF U. S. WEIGHT

On September 18, 2001, Escalade Sports acquired substantially all of the assets
of U. S. Weight, Inc., the only U. S. manufacturer of filled vinyl weights and
weight sets. The assets purchased were accounts receivable, inventory and
machinery and equipment. The cost of the purchase was $5,889,194. The
acquisition was accounted for as a purchase and the excess of cost over the fair
value of net assets acquired was $2,723,720.

ACQUISITION OF THE STEP PRODUCT LINE

On January 25, 2002, Escalade acquired substantially all of the assets relating
to The Step(R) product line from Bollinger Industries for cash. The Step(R) is
America's original aerobic step fitness system and is widely used by individuals
and at over 18,000 health clubs. The purchase price was $4,840,000. The assets
acquired include $120,000 of equipment and $4,720,000 of patents. The patents
are being amortized over an 8-year period.

ACQUISITION OF STEVE MIZERAK, INC.

On March 26, 2002, Escalade Sports acquired substantially all of the assets of
Steve Mizerak, Inc. The acquisition includes an exclusive line of billiard
equipment and intellectual property. The cost of the purchase was $1,229,000.
The assets acquired include inventory of $129,000, trademarks of $1,085,000 and
equipment of $15,000. The trademarks are being amortized over a 15-year period.

ACQUISITION OF MURREY AND SONS BILLIARD ASSETS

On May 28, 2002, Escalade Sports acquired certain assets and assumed certain
liabilities related to the manufacture and distribution of Murrey's exclusive
line of premium indoor and outdoor billiard and soccer tables marketed under the
Murrey brand name. The cost of the purchase was $2,489,000. The assets acquired
included inventory of $1.2 million, machinery of $837,000, non-compete agreement
of $400,000, other assets of $127,000 and assumed liabilities of $75,000. The
non-compete agreement is being amortized over a 5-year period.

The results of operations from the business combinations occurring in 2002, 2001
and 2000 have been included in the results of operations of the Company
subsequent to the date of the acquisitions and did not have a material effect on
the Company's financial statements.

(F-24)

ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22 -- OTHER COMPREHENSIVE INCOME

2002
---------------------------------------------
BEFORE-TAX TAX NET-OF-TAX
YEAR ENDED DECEMBER 28 AMOUNT BENEFIT AMOUNT
- ---------------------- --------- ------- ----------

Unrealized holding losses arising during the year $(248,082) $99,232 $(148,850)
========= ======= =========

2001
---------------------------------------------
BEFORE-TAX TAX NET-OF-TAX
YEAR ENDED DECEMBER 29 AMOUNT BENEFIT AMOUNT
- ---------------------- --------- ------- ----------

Unrealized holding losses arising during the year $(120,122) $48,049 $ (72,073)
========= ======= =========

2000
---------------------------------------------
BEFORE-TAX TAX NET-OF-TAX
YEAR ENDED DECEMBER 30 AMOUNT BENEFIT AMOUNT
- ---------------------- --------- ------- ----------

Unrealized holding losses arising during the year $ (7,086) $ 2,834 $ (4,252)
========= ======= =========

NOTE 23 -- EVENT SUBSEQUENT TO THE BALANCE SHEET DATE

On December 30, 2002, the Company acquired an additional 760,500 shares and on
January 30, 2003, an additional 340,000 shares of the outstanding stock of
Schleicher. With these acquisitions, the Company's total ownership increased to
1,807,334 shares or 63% of the outstanding shares. At December 28, 2002, the
Company owned approximately 22% of Schleicher, which it acquired during the
third quarter of 2002. The Company is currently engaged in a tender offer to
acquire all remaining shares. It was not practicable to provide the additional
financial information and disclosures as required by SFAS No. 141, Business
Combinations.

(F-25)

[BKO LOGO]

INDEPENDENT ACCOUNTANTS' REPORT

Stockholders and Board of Directors
Escalade, Incorporated
Evansville, Indiana

We have audited the consolidated financial statements of Escalade, Incorporated
as of December 28, 2002 and December 29, 2001 and for each of the three years in
the period ended December 28, 2002 and have issued our report thereon dated
January 31, 2003; such consolidated financial statements and report are included
elsewhere in this Form 10-K. Our audits also included the consolidated financial
statement schedules of Escalade, Incorporated listed in Item 14. These
consolidated financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.

BKD, LLP

Evansville, Indiana
January 31, 2003

(S-1)

ESCALADE, INCORPORATED AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
ADDITIONS
--------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS-- DEDUCTIONS-- AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE (2) OF PERIOD
----------- ---------- ---------- ----------- ------------ ---------

Allowance for doubtful accounts
and discounts (1)
Fiscal year ended December 28, 2002 $ 513,998 $ 100,837 $ 65,547 $ 549,288
Fiscal year ended December 29, 2001 611,052 40,705 137,759 513,998
Fiscal year ended December 30, 2000 761,363 141,136 291,447 611,052

Product warranty reserves
Fiscal year ended December 28, 2002 1,306,600 1,226,520 1,209,420 1,323,700
Fiscal year ended December 29, 2001 1,704,556 1,473,300 1,871,256 1,306,600
Fiscal year ended December 30, 2000 707,633 2,075,288 1,078,365 1,704,556

Customer allowance reserves
Fiscal year ended December 28, 2002 7,173,799 12,816,441 12,931,216 7,059,024
Fiscal year ended December 29, 2001 6,250,203 9,724,595 8,800,999 7,173,799
Fiscal year ended December 30, 2000 4,712,522 6,356,023 4,818,342 6,250,203

Inventory valuation reserves
Fiscal year ended December 28, 2002 1,120,147 684,668 622,344 1,182,471
Fiscal year ended December 29, 2001 800,022 1,940,910 1,620,785 1,120,147
Fiscal year ended December 30, 2000 759,050 904,787 863,815 800,022

(1) Deducted from related assets
(2) Accounts charged off, less recoveries

(S-2)

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.

ESCALADE, INCORPORATED

By: \s\ C. W. "Bill" Reed March 7, 2003
- -----------------------------------------
C. W. "Bill" Reed
President and Chief Executive Officer

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.

Chief Executive Officer
and Director
\s\ C. W. Reed (Principal Executive Officer) March 7, 2003
- -----------------------------------------
C. W. Reed

\s\ Robert E. Griffin Chairman and Director March 7, 2003
- -----------------------------------------
Robert E. Griffin

Secretary and Treasurer
(Principal Financial and Accounting
\s\ John R. Wilson Officer) March 7, 2003
- -----------------------------------------
John R. Wilson

\s\ Blaine E. Matthews, Jr. Director March 7, 2003
- -----------------------------------------
Blaine E. Matthews, Jr.

\s\ A. Graves Williams, Jr. Director March 7, 2003
- -----------------------------------------
A. Graves Williams, Jr.

\s\ Keith P. Williams Director March 7, 2003
- -----------------------------------------
Keith P. Williams

\s\ Yale Blanc Director March 7, 2003
- -----------------------------------------
Yale Blanc

(S-3)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, C. W. (Bill) Reed, 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 annual 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-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures 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 annual report is
being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

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 in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 7, 2003

\s\ C. W. "Bill" Reed
---------------------
C. W. (Bill) Reed
Chief Executive Officer

(S-4)

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, John R. Wilson, 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 annual 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-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures 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 annual report is
being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

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 in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 7, 2003

\s\ John R. Wilson
------------------
John R. Wilson
Chief Financial Officer

(S-5)