SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-Q

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

For the quarter ended July 11, 2009 or


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

For the transition period from _____ to _____


Commission File Number 0-6966

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

|                          |              
|------------------------- | -------------
|Indiana                   | 13-2739290   
|(State
 of incorporation) | (I.R.S.
 EIN)

|                                        |           
|--------------------------------------- | ----------
|817 Maxwell Ave, Evansville, Indiana    | 47711     
|(Address of principal executive office) | (Zip Code)

812-467-4449(Registrants
Telephone Number)

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

|                            |                                        
|--------------------------- | ---------------------------------------
|Common
 Stock, No Par Value | The
 NASDAQ Stock Market LLC           
|(Title
 of Class)           | (Name
 of Exchange on Which Registered)

Securities registered pursuant to section 12(g) of the Act: NONE

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 o


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


Yes o     No o


Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definition of
accelerated filer, large accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act.


|                                                                      |  |                            
|--------------------------------------------------------------------- |  | ---------------------------
|Large accelerated filer o                                             |  | Accelerated filer o        
|Non-accelerated filer o(do not
 check if a smaller reporting company) |  | Smaller reporting company x

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

Yes o     No x


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


|                     |  |                              
|-------------------- |  | -----------------------------
|Class                |  | Outstanding
 at July 31, 2009
|                     |  |                              
|Common, no par value |  | 12,623,542                   

---



INDEX

|          |                                                                                                                                              |           | 
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------- | --------- | 
|          |                                                                                                                                              | Page
 No.
|          |                                                                                                                                              |           | 
|Part I.   | Financial
 Information:                                                                                                                      |           | 
|          |                                                                                                                                              |           | 
|Item 1 -  | Financial Statements:                                                                                                                        |           | 
|          |                                                                                                                                              |           | 
|          | Consolidated Condensed Balance Sheets as of July 11,
 2009, July 12, 2008, and December 27, 2008                                             | 3         | 
|          |                                                                                                                                              |           | 
|          | Consolidated Condensed Statements of
 Operations for the Three Months and Six Months Ended July 11, 2009 and
 July 12, 2008                  | 4         | 
|          |                                                                                                                                              |           | 
|          | Consolidated Condensed Statements of Comprehensive
 Income (Loss) for the Three Months and Six Months Ended July 11, 2009 and
 July 12, 2008 | 4         | 
|          |                                                                                                                                              |           | 
|          | Consolidated Condensed Statements of Cash Flows for
 the Six Months Ended July 11, 2009 and July 12, 2008                                    | 5         | 
|          |                                                                                                                                              |           | 
|          | Notes to Consolidated Condensed Financial Statements                                                                                         | 6         | 
|          |                                                                                                                                              |           | 
|Item 2 -  | Managements Discussion and Analysis of Financial
 Condition and Results of Operations                                                       | 11        | 
|          |                                                                                                                                              |           | 
|Item 3 -  | Quantitative and Qualitative Disclosures about Market
 Risk                                                                                  | 13        | 
|          |                                                                                                                                              |           | 
|Item 4T - | Controls and Procedures                                                                                                                      | 14        | 
|          |                                                                                                                                              |           | 
|Part II.  | Other Information                                                                                                                            |           | 
|          |                                                                                                                                              |           | 
|Item 1A   | Risk Factors                                                                                                                                 | 15        | 
|          |                                                                                                                                              |           | 
|Item 2 -  | Issuer Purchases of Equity Securities                                                                                                        | 17        | 
|          |                                                                                                                                              |           | 
|Item 4 -  | Submission of Matters to a Vote of Security Holders                                                                                          | 17        | 
|          |                                                                                                                                              |           | 
|Item 6 -  | Exhibits                                                                                                                                     | 18        | 
|          |                                                                                                                                              |           | 
|          | Signatures                                                                                                                                   | 18        | 

2

---



PART I.     FINANCIAL
INFORMATION

|        |                     
|------- | --------------------
|ITEM
1. | FINANCIAL STATEMENTS

ESCALADE, INCORPORATED AND
SUBSIDIARIESCONSOLIDATED CONDENSED BALANCE SHEETS
(All amounts in thousands except share information)

|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|-------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | --------------------------- | - | -------------------------- |  | - | ------- | 
|                                                                                                                           |  | July
 11, 2009
 (Unaudited) |         | July
 12, 2008
 (Unaudited) |   | December 27, 2008(Audited) | 
|ASSETS                                                                                                                     |  |                             |         |                             |   |                            |  |   |         | 
|Current Assets:                                                                                                            |  |                             |         |                             |   |                            |  |   |         | 
|Cash and cash equivalents                                                                                                  |  | $                           | 4,137   |                             | $ | 4,486                      |  | $ | 3,617   | 
|Receivables, less allowance of $1,411; $1,014; and $1,114;
 respectively                                                   |  |                             | 22,607  |                             |   | 32,147                     |  |   | 27,178  | 
|Inventories                                                                                                                |  |                             | 28,102  |                             |   | 39,090                     |  |   | 29,860  | 
|Prepaid expenses                                                                                                           |  |                             | 2,041   |                             |   | 2,720                      |  |   | 1,254   | 
|Assets held for sale                                                                                                       |  |                             | 3,325   |                             |   |                            |  |   | 3,325   | 
|Deferred income tax benefit                                                                                                |  |                             | 1,945   |                             |   | 2,397                      |  |   | 2,015   | 
|Income tax receivable                                                                                                      |  |                             | 3,434   |                             |   | 2,397                      |  |   | 5,327   | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|TOTAL CURRENT ASSETS                                                                                                       |  |                             | 65,591  |                             |   | 83,237                     |  |   | 72,576  | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|Property, plant and
 equipment, net                                                                                        |  |                             | 19,488  |                             |   | 23,719                     |  |   | 20,209  | 
|Intangible assets                                                                                                          |  |                             | 17,954  |                             |   | 20,306                     |  |   | 19,153  | 
|Goodwill                                                                                                                   |  |                             | 25,750  |                             |   | 26,772                     |  |   | 25,811  | 
|Investments                                                                                                                |  |                             | 9,409   |                             |   | 12,076                     |  |   | 8,129   | 
|Deferred income tax
 benefit                                                                                               |  |                             | 723     |                             |   |                           |  |   | 723     | 
|Other assets                                                                                                               |  |                             | 678     |                             |   | 1,464                      |  |   | 1,100   | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|                                                                                                                           |  | $                           | 139,593 |                             | $ | 167,574                    |  | $ | 147,701 | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|LIABILITIES AND
 STOCKHOLDERS EQUITY                                                                                      |  |                             |         |                             |   |                            |  |   |         | 
|Current Liabilities:                                                                                                       |  |                             |         |                             |   |                            |  |   |         | 
|Notes payable                                                                                                              |  | $                           | 40,052  |                             | $ | 52,345                     |  | $ | 46,525  | 
|Trade accounts payable                                                                                                     |  |                             | 2,838   |                             |   | 4,450                      |  |   | 3,272   | 
|Accrued liabilities                                                                                                        |  |                             | 14,103  |                             |   | 18,433                     |  |   | 16,698  | 
|Income taxes payable                                                                                                       |  |                             | 961     |                             |   |                           |  |   | 1,239   | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|TOTAL CURRENT LIABILITIES                                                                                                  |  |                             | 57,954  |                             |   | 75,228                     |  |   | 67,734  | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|Other Liabilities:                                                                                                         |  |                             |         |                             |   |                            |  |   |         | 
|Long-term debt                                                                                                             |  |                             |        |                             |   | 2,737                      |  |   |        | 
|Other non-current income tax liability                                                                                     |  |                             |        |                             |   | 118                        |  |   |        | 
|Deferred income tax liability                                                                                              |  |                             |        |                             |   | 589                        |  |   |        | 
|Deferred compensation                                                                                                      |  |                             | 1,236   |                             |   | 1,128                      |  |   | 1,177   | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|                                                                                                                           |  |                             | 59,190  |                             |   | 79,800                     |  |   | 68,911  | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|Stockholders equity:                                                                                                      |  |                             |         |                             |   |                            |  |   |         | 
|Preferred stock:                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|Authorized 1,000,000 shares; no par value, none issued                                                                     |  |                             |         |                             |   |                            |  |   |         | 
|Common stock:                                                                                                              |  |                             |         |                             |   |                            |  |   |         | 
|Authorized 30,000,000 shares; no par value, issued and outstanding -
 12,623,542; 12,616,042; and 12,616,042; respectively |  |                             | 12,624  |                             |   | 12,616                     |  |   | 12,616  | 
|Retained earnings                                                                                                          |  |                             | 63,242  |                             |   | 68,437                     |  |   | 63,050  | 
|Accumulated other comprehensive
 income                                                                                    |  |                             | 4,537   |                             |   | 6,721                      |  |   | 3,124   | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|                                                                                                                           |  |                             | 80,403  |                             |   | 87,774                     |  |   | 78,790  | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 
|                                                                                                                           |  | $                           | 139,593 |                             | $ | 167,574                    |  | $ | 147,701 | 
|                                                                                                                           |  |                             |         |                             |   |                            |  |   |         | 

See notes to Consolidated
Condensed Financial Statements.

3

---



ESCALADE, INCORPORATED AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(All amounts in thousands, except per share amounts)

|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|-------------------------------------------- |  | ------------------- | ------ | ----------------- | - | -------------- | - | -------------- | ------ | - | - | ------ | -
|                                             |  | Three
 Months Ended |        | Six
 Months Ended |  
|                                             |  |                     |        |                   |  
|                                             |  | July
 11, 2009      |        | July
 12, 2008    |   | July
 11, 2009 |   | July
 12, 2008 |       
|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|Net sales                                    |  | $                   | 35,641 |                   | $ | 45,796         |   | $              | 60,599 |   | $ | 74,962 |  
|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|Costs, expenses and other
 income:           |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|Cost of products sold                        |  |                     | 24,579 |                   |   | 33,275         |   |                | 41,675 |   |   | 54,018 |  
|Selling, general and administrative expenses |  |                     | 8,748  |                   |   | 12,578         |   |                | 16,771 |   |   | 21,620 |  
|Amortization                                 |  |                     | 940    |                   |   | 732            |   |                | 1,407  |   |   | 1,169  |  
|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|Operating income (loss)                      |  |                     | 1,374  |                   |   | (789           | ) |                | 746    |   |   | (1,845 | )
|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|Interest expense, net                        |  |                     | (658   | )                 |   | (660           | ) |                | (900   | ) |   | (1,147 | )
|Other income (expense)                       |  |                     | 47     |                   |   | 43             |   |                | 231    |   |   | 205    |  
|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|Income (loss) before
 income taxes (benefit) |  |                     | 763    |                   |   | (1,406         | ) |                | 77     |   |   | (2,787 | )
|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|Provision (benefit) for
 income tax          |  |                     | 397    |                   |   | (702           | ) |                | 150    |   |   | (1,235 | )
|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|Net income (loss)                            |  | $                   | 366    |                   | $ | (704           | ) | $              | (73    | ) | $ | (1,552 | )
|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|                                             |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|Per Share Data:                              |  |                     |        |                   |   |                |   |                |        |   |   |        |  
|Basic earnings (loss) per share              |  | $                   | 0.03   |                   | $ | (0.06          | ) | $              | (0.01  | ) | $ | (0.12  | )
|Diluted earnings (loss) per share            |  | $                   | 0.03   |                   | $ | (0.06          | ) | $              | (0.01  | ) | $ | (0.12  | )
|Cash dividend paid                           |  |                     |       |                   |   |               |   |                |       |   | $ | 0.25   |  

CONSOLIDATED CONDENSED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

|                                                                                                                           |  |   |       |  |   |      |   |   |       |   |   |        |  
|-------------------------------------------------------------------------------------------------------------------------- |  | - | ----- |  | - | ---- | - | - | ----- | - | - | ------ | -
|Net income (loss)                                                                                                          |  | $ | 366   |  | $ | (704 | ) | $ | (73   | ) | $ | (1,552 | )
|                                                                                                                           |  |   |       |  |   |      |   |   |       |   |   |        |  
|Unrealized gain (loss) on securities available for sale, net of tax
 (benefit) of $94, $(40), $75 and $(115), respectively |  |   | 145   |  |   | (139 | ) |   | 116   |   |   | (469   | )
|                                                                                                                           |  |   |       |  |   |      |   |   |       |   |   |        |  
|Foreign currency translation adjustment                                                                                    |  |   | 964   |  |   | 349  |   |   | 1,297 |   |   | 1,402  |  
|                                                                                                                           |  |   |       |  |   |      |   |   |       |   |   |        |  
|Unrealized (loss) on interest rate swap agreement, net of tax of $0,
 $5, $0 and $10, respectively                         |  |   |      |  |   | (18  | ) |   |      |   |   | (35    | )
|                                                                                                                           |  |   |       |  |   |      |   |   |       |   |   |        |  
|                                                                                                                           |  |   |       |  |   |      |   |   |       |   |   |        |  
|Comprehensive income (loss)                                                                                                |  | $ | 1,475 |  | $ | (512 | ) | $ | 1,340 |   | $ | (654   | )
|                                                                                                                           |  |   |       |  |   |      |   |   |       |   |   |        |  

See notes to Consolidated
Condensed Financial Statements.

4

---



ESCALADE, INCORPORATED AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(All amounts in thousands)

|                                                                                               |  |                   |        |                |   |         |  
|---------------------------------------------------------------------------------------------- |  | ----------------- | ------ | -------------- | - | ------- | -
|                                                                                               |  | Six
 Months Ended |       
|                                                                                               |  |                   |       
|                                                                                               |  | July
 11, 2009    |        | July
 12, 2008 |  
|                                                                                               |  |                   |        |                |   |         |  
|Operating Activities:                                                                          |  |                   |        |                |   |         |  
|Net loss                                                                                       |  | $                 | (73    | )              | $ | (1,552  | )
|Depreciation and amortization                                                                  |  |                   | 3,186  |                |   | 2,436   |  
|Loss (gain) on disposal of property and equipment                                              |  |                   | 236    |                |   | (6      | )
|Employee stock-based compensation                                                              |  |                   | 273    |                |   | 447     |  
|Adjustments necessary to reconcile net income (loss) to net cash used
 by operating activities |  |                   | 4,230  |                |   | (14,329 | )
|                                                                                               |  |                   |        |                |   |         |  
|Net cash provided (used) by operating activities                                               |  |                   | 7,852  |                |   | (13,004 | )
|                                                                                               |  |                   |        |                |   |         |  
|                                                                                               |  |                   |        |                |   |         |  
|Investing Activities:                                                                          |  |                   |        |                |   |         |  
|Purchase of property and equipment                                                             |  |                   | (1,580 | )              |   | (4,109  | )
|Acquisition of assets                                                                          |  |                   |       |                |   | (452    | )
|Proceeds from sale of property and equipment                                                   |  |                   | 262    |                |   | 26      |  
|                                                                                               |  |                   |        |                |   |         |  
|Net cash used by investing activities                                                          |  |                   | (1,318 | )              |   | (4,535  | )
|                                                                                               |  |                   |        |                |   |         |  
|                                                                                               |  |                   |        |                |   |         |  
|Financing Activities:                                                                          |  |                   |        |                |   |         |  
|Net increase (decrease) in notes payable                                                       |  |                   | (6,473 | )              |   | 22,915  |  
|Proceeds from exercise of stock options                                                        |  |                   |       |                |   | 313     |  
|Director fees paid by issuing stock                                                            |  |                   |       |                |   | 22      |  
|Purchase of common stock                                                                       |  |                   |       |                |   | (921    | )
|Dividends paid                                                                                 |  |                   |       |                |   | (3,174  | )
|                                                                                               |  |                   |        |                |   |         |  
|Net cash provided (used) by financing activities                                               |  |                   | (6,473 | )              |   | 19,155  |  
|                                                                                               |  |                   |        |                |   |         |  
|Effect of exchange rate changes on cash                                                        |  |                   | 459    |                |   | 62      |  
|                                                                                               |  |                   |        |                |   |         |  
|Net increase in cash and cash equivalents                                                      |  |                   | 520    |                |   | 1,678   |  
|Cash and cash equivalents, beginning of period                                                 |  |                   | 3,617  |                |   | 2,808   |  
|                                                                                               |  |                   |        |                |   |         |  
|Cash and cash equivalents, end of period                                                       |  | $                 | 4,137  |                | $ | 4,486   |  
|                                                                                               |  |                   |        |                |   |         |  

See notes to Consolidated
Condensed Financial Statements.

5

---



ESCALADE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

|                                                    
|----------------------------------------------------
|Note A  Summary of
 Significant Accounting Policies
|                                                    

Presentation of Consolidated Condensed Financial
Statements - The
significant accounting policies followed by the Company and its wholly owned
subsidiaries for interim financial reporting are consistent with the accounting
policies followed for annual financial reporting. All adjustments that are of a normal recurring nature and are in
the opinion of management necessary for a fair statement of the results for the
periods reported have been included in the accompanying consolidated condensed
financial statements. The consolidated
condensed balance sheet of the Company as of December 27, 2008 has been derived
from the audited consolidated condensed balance sheet of the Company as of that
date. Certain information and note
disclosures normally included in the Companys annual financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. These consolidated condensed financial
statements should be read in conjunction with the consolidated financial statements
and notes thereto included in the Companys Form 10-K annual report for 2008
filed with the Securities and Exchange Commission.

|                          
|--------------------------
|Note B  Reclassifications
|                          

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

|                         
|-------------------------
|Note C  Seasonal Aspects
|                         

The results of operations
for the six-month periods ended July 11, 2009 and July 12, 2008 are not
necessarily indicative of the results to be expected for the full year.

|                    
|--------------------
|Note D  Inventories
|                    

|                            |  |                |        |                |   |                    |  |   |        | 
|--------------------------- |  | -------------- | ------ | -------------- | - | ------------------ |  | - | ------ | 
|(All
 amounts in thousands) |  | July
 11, 2009 |        | July
 12, 2008 |   | December
 27, 2008 | 
|                            |  |                |        |                |   |                    |  |   |        | 
|Raw materials               |  | $              | 9,574  |                | $ | 10,468             |  | $ | 9,540  | 
|Work in progress            |  |                | 2,751  |                |   | 5,807              |  |   | 4,506  | 
|Finished goods              |  |                | 15,777 |                |   | 22,815             |  |   | 15,814 | 
|                            |  |                |        |                |   |                    |  |   |        | 
|                            |  | $              | 28,102 |                | $ | 39,090             |  | $ | 29,860 | 
|                            |  |                |        |                |   |                    |  |   |        | 

|                      
|----------------------
|Note E  Notes Payable
|                      

On April 30, 2009 the
Company signed a loan agreement with JP Morgan Chase Bank, N.A. (Chase) for a
senior secured revolving credit facility in the maximum amount up to
$50,000,000 and through Chase London Branch, as senior secured revolving credit
facility in the maximum amount of 3,000,000 Euro upon certain terms and
conditions. The credit facility has a
maturity date of May 31, 2010. A portion of the credit facility not in excess
of $3,500,000 is available for the issuance of commercial or standby letters of
credit to be issued by Chase. In July
2009, the agreement was amended to extend the deadline for completion of
certain post closing matters to September 30, 2009.

6

---



|                     
|---------------------
|Note F  Income Taxes
|                     

The provision for income
taxes was computed based on financial statement income. In accordance with FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109 (FIN 48), which became effective
for the Company on December 31, 2006, the Company has recorded the following
changes in uncertain tax positions:

|                                         |  |                  |     |               |   |     | 
|---------------------------------------- |  | ---------------- | --- | ------------- | - | --- | 
|                                         |  | Six Months Ended |    
|In Thousands                             |  | July 11, 2009    |     | July 12, 2008 |  
|                                         |  |                  |     |               |  
|Beginning Balance                        |  | $                | 954 |               | $ | 118 | 
|Additions for current year tax positions |  |                  | 7   |               |   |    | 
|Additions for prior year tax positions   |  |                  |    |               |   |    | 
|Settlements                              |  |                  |    |               |   |    | 
|Reductions Settlements                   |  |                  |    |               |   |    | 
|Reductions for prior year tax positions  |  |                  |    |               |   |    | 
|                                         |  |                  |     |               |   |     | 
|Ending Balance                           |  | $                | 961 |               | $ | 118 | 
|                                         |  |                  |     |               |   |    

|                                              
|----------------------------------------------
|Note G  Fair Values of
 Financial Instruments
|                                              

Effective
December 30, 2007, the Company adopted Statement of Financial Accounting
Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. FAS 157 has been applied
prospectively as of the beginning of the year.

FAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants
at the measurement date. FAS 157 also
establishes a fair value hierarchy which requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring
fair value. The standard describes
three levels of inputs that may be used to measure fair value:

| |         |                                                                                                                                                                                                                                                                                                          
| | ------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Level 1 | Quoted
 prices in active markets for identical assets or liabilities                                                                                                                                                                                                                                     
| |         |                                                                                                                                                                                                                                                                                                          
| | Level 2 | Observable
 inputs other than Level 1 prices, such as quoted prices for similar assets or
 liabilities; quoted prices in markets that are not active; or other inputs
 that are observable or can be corroborated by observable market data for
 substantially the full term of the assets or liabilities
| |         |                                                                                                                                                                                                                                                                                                          
| | Level 3 | Unobservable
 inputs that are supported by little or no market activity and that are
 significant to the fair value of the assets or liabilities                                                                                                                                                         

Following is a
description of the valuation methodologies used for instruments measured at
fair value on a recurring basis and recognized in the accompanying balance
sheets, as well as the general classification of such instruments pursuant to
the valuation hierarchy.

Available-for-sale Securities

Where quoted
market prices are available in an active market, securities are classified
within Level 1 of the valuation hierarchy.
Level 1 securities include exchange
traded equities. If quoted
market prices are not available, then fair values are estimated by using
pricing models, quoted prices of securities with similar characteristics or
discounted cash flows.

7

---



The following
table presents the fair value measurements of assets and liabilities recognized
in the accompanying balance sheet measured at fair value on a recurring basis
and the level within the FAS 157 fair value hierarchy in which the fair value
measurements fall at July 11, 2009:

|                                           |  |            |       |                                                                 |                               |                                                |  |                                            |   |  |   |   | 
|------------------------------------------ |  | ---------- | ----- | --------------------------------------------------------------- | ----------------------------- | ---------------------------------------------- |  | ------------------------------------------ | - |  | - | - | 
|                                           |  |            |       |                                                                 | Fair Value Measurements Using |                                               
|                                           |  |            |       |                                                                 |                               |                                               
|In thousands                               |  | Fair Value |       | Quoted Prices in Active Markets for Identical Assets
 (Level 1) |                               | Significant Other Observable Inputs
 (Level 2) |  | Significant Unobservable Inputs
 (Level 3) |  
|                                           |  |            |       |                                                                 |                               |                                                |  |                                            |  
|Available-for-sale securities-mutual funds |  | $          | 1,403 |                                                                 | $                             | 1,403                                          |  | $                                          |  |  | $ |  | 

The following
methods were used to estimate the fair value of all other financial instruments
not recognized in the accompanying balance sheets.

Cash and Cash Equivalents

Fair values of
cash and cash equivalents approximate cost due to the short period of time to
maturity.

Notes Payable and Long-term Debt

As of July 11,
2009, the Company does not have debt classified as long-term. The Company believes the carrying value of
short-term debt adequately reflects the fair value of these instruments.

The following
table presents estimated fair values of the Companys financial instruments in
accordance with FAS 107 not previously disclosed at July 11, 2009 and July 12,
2008.

|                                           |  |                 |        |               |   |                 |  |            |        |  |   |        | 
|------------------------------------------ |  | --------------- | ------ | ------------- | - | --------------- |  | ---------- | ------ |  | - | ------ | 
|                                           |  | July 11, 2009   |        | July 12, 2008 |  
|                                           |  |                 |        |               |  
|In thousands                               |  | Carrying Amount |        | Fair Value    |   | Carrying Amount |  | Fair Value |       
|                                           |  |                 |        |               |   |                 |  |            |       
|Financial
 assets                          |  |                 |        |               |   |                 |  |            |        |  |   |        | 
|Cash and cash equivalents                  |  | $               | 4,137  |               | $ | 4,137           |  | $          | 4,486  |  | $ | 4,486  | 
|Available-for-sale securities-mutual funds |  | $               | 1,403  |               | $ | 1,403           |  | $          | 3,789  |  | $ | 3,789  | 
|                                           |  |                 |        |               |   |                 |  |            |        |  |   |        | 
|Financial
 liabilities                     |  |                 |        |               |   |                 |  |            |        |  |   |        | 
|Note payable and Short-term debt           |  | $               | 40,052 |               | $ | 40,052          |  | $          | 52,345 |  | $ | 52,345 | 

|                                     
|-------------------------------------
|Note H  Employee Stock
 Compensation
|                                     

The fair value of
stock-based compensation is recognized in accordance with the provisions of
SFAS No. 123R Share-Based Payments (SFAS 123R).

During the three and six
months ended July 11, 2009 and pursuant to the 2007 Incentive Plan, the Company
awarded 30,000 stock options and 54,103 restricted stock units to directors and
667,000 stock options to employees. The
stock options awarded to directors vest at the end of one year and have an
exercise price equal to the market price on the date of grant. The restricted stock units awarded to the
directors vest after one year following the grant date. The stock options awarded to employees vest
at the end of three years and are subject to forfeiture if on the vesting date
the employee is not employed. Director stock options and restricted stock units
are subject to forfeiture if on the vesting date the director no longer holds a
position with the Company.

8

---



The Company utilizes the
Black-Scholes option pricing model to determine the fair value of stock options
granted and Monte Carlo techniques to determine the fair value of restricted
stock units granted with market conditions attached to vesting.

During the three months and
six months ended July 11, 2009, the Company recognized stock based compensation
expense of $158 thousand and $273 thousand, respectively. During the three
months and six months ended July 12, 2008, the Company recognized stock based
compensation expense of $294 thousand and $447 thousand, respectively. At July
11, 2009 and July 12, 2008, respectively, there was $0.9 million and $1.5
million in unrecognized stock-based compensation expense related to non-vested
stock awards.

|                             
|-----------------------------
|Note I  Segment
 Information
|                             

|                                 |  |                                                      |        |                  |   |        |  |       |        |   |   |        | 
|-------------------------------- |  | ---------------------------------------------------- | ------ | ---------------- | - | ------ |  | ----- | ------ | - | - | ------ | 
|                                 |  | As
 of and for the Three Months
 Ended July 11, 2009 |       
|                                 |  |                                                      |       
|In thousands                     |  | Sporting
 Goods                                      |        | Office
 Products |   | Corp.  |  | Total |       
|                                 |  |                                                      |        |                  |   |        |  |       |       
|                                 |  |                                                      |        |                  |   |        |  |       |        |   |   |        | 
|Revenues from external customers |  | $                                                    | 23,403 |                  | $ | 12,238 |  | $     |       |   | $ | 35,641 | 
|Operating income (loss)          |  |                                                      | 2,177  |                  |   | 502    |  |       | (1,305 | ) |   | 1,374  | 
|Net income (loss)                |  |                                                      | 691    |                  |   | 214    |  |       | (539   | ) |   | 366    | 

|                                  |  |                                                    |        |                  |   |        |  |       |        |   |   |         |  
|--------------------------------- |  | -------------------------------------------------- | ------ | ---------------- | - | ------ |  | ----- | ------ | - | - | ------- | -
|                                  |  | As
 of and for the Six Months
 Ended July 11, 2009 |       
|                                  |  |                                                    |       
|In thousands                      |  | Sporting
 Goods                                    |        | Office
 Products |   | Corp.  |  | Total |       
|                                  |  |                                                    |        |                  |   |        |  |       |       
|                                  |  |                                                    |        |                  |   |        |  |       |        |   |   |         |  
|Revenues from external
 customers |  | $                                                  | 38,970 |                  | $ | 21,629 |  | $     |       |   | $ | 60,599  |  
|Operating income (loss)           |  |                                                    | 2,212  |                  |   | 1,500  |  |       | (2,966 | ) |   | 746     |  
|Net income (loss)                 |  |                                                    | 200    |                  |   | 969    |  |       | (1,242 | ) |   | (73     | )
|Total assets                      |  | $                                                  | 72,727 |                  | $ | 42,741 |  | $     | 24,125 |   | $ | 139,593 |  

|                                  |  |                                                      |        |                  |   |        |  |       |        |   |   |        |  
|--------------------------------- |  | ---------------------------------------------------- | ------ | ---------------- | - | ------ |  | ----- | ------ | - | - | ------ | -
|                                  |  | As
 of and for the Three Months
 Ended July 12, 2008 |       
|                                  |  |                                                      |       
|In thousands                      |  | Sporting
 Goods                                      |        | Office
 Products |   | Corp.  |  | Total |       
|                                  |  |                                                      |        |                  |   |        |  |       |       
|                                  |  |                                                      |        |                  |   |        |  |       |        |   |   |        |  
|Revenues from external
 customers |  | $                                                    | 29,197 |                  | $ | 16,599 |  | $     |       |   | $ | 45,796 |  
|Operating income (loss)           |  |                                                      | (380   | )                |   | 1,107  |  |       | (1,516 | ) |   | (789   | )
|Net income (loss)                 |  |                                                      | (603   | )                |   | 659    |  |       | (760   | ) |   | (704   | )

|                                  |  |                                                    |        |                  |   |        |  |       |        |   |   |         |  
|--------------------------------- |  | -------------------------------------------------- | ------ | ---------------- | - | ------ |  | ----- | ------ | - | - | ------- | -
|                                  |  | As
 of and for the Six Months
 Ended July 12, 2008 |       
|                                  |  |                                                    |       
|In thousands                      |  | Sporting
 Goods                                    |        | Office
 Products |   | Corp.  |  | Total |       
|                                  |  |                                                    |        |                  |   |        |  |       |       
|                                  |  |                                                    |        |                  |   |        |  |       |        |   |   |         |  
|Revenues from external
 customers |  | $                                                  | 46,730 |                  | $ | 28,232 |  | $     |       |   | $ | 74,962  |  
|Operating income (loss)           |  |                                                    | (1,679 | )                |   | 2,127  |  |       | (2,293 | ) |   | (1,845  | )
|Net income (loss)                 |  |                                                    | (1,521 | )                |   | 1,246  |  |       | (1,277 | ) |   | (1,552  | )
|Total assets                      |  | $                                                  | 94,026 |                  | $ | 50,708 |  | $     | 22,840 |   | $ | 167,574 |  

9

---



|                         
|-------------------------
|Note J  Dividend Payment
|                         

The Company has not declared
a dividend to be paid in 2009.

|                            
|----------------------------
|Note K  Earnings Per
 Share
|                            

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

|                                                              |  |                     |        |                   |  |                |  |                |        |  |  |        | 
|------------------------------------------------------------- |  | ------------------- | ------ | ----------------- |  | -------------- |  | -------------- | ------ |  |  | ------ | 
|                                                              |  | Three
 Months Ended |        | Six
 Months Ended | 
|                                                              |  |                     |        |                   | 
|All amounts in thousands                                      |  | July
 11, 2009      |        | July
 12, 2008    |  | July
 11, 2009 |  | July
 12, 2008 |       
|                                                              |  |                     |        |                   |  |                |  |                |       
|                                                              |  |                     |        |                   |  |                |  |                |        |  |  |        | 
|Weighted average common shares outstanding                    |  |                     | 12,624 |                   |  | 12,635         |  |                | 12,620 |  |  | 12,656 | 
|Dilutive effect of stock options and restricted stock units   |  |                     | 202    |                   |  | 22             |  |                | 119    |  |  | 22     | 
|                                                              |  |                     |        |                   |  |                |  |                |        |  |  |        | 
|Weighted average common shares outstanding, assuming dilution |  |                     | 12,826 |                   |  | 12,657         |  |                | 12,739 |  |  | 12,678 | 
|                                                              |  |                     |        |                   |  |                |  |                |        |  |  |        | 

Stock options that are
anti-dilutive as to earnings per share and unvested restricted stock units
which have a market condition for vesting that has not been achieved are
ignored in the computation of dilutive earnings per share. The number of stock
options and restricted stock units that were excluded in 2009 and 2008 was
492,725 and 668,217, respectively.

|                                  
|----------------------------------
|Note L  New Accounting
 Standards
|                                  

With the
exception of those discussed below, there have been no recent accounting pronouncements
or changes in accounting pronouncements during the six months ended July 11,
2009, as compared to the recent accounting pronouncements described in the
Companys Annual Report on Form 10-K for the fiscal year ended December 27,
2008, that are of significance, or potential significance to the Company.

In April 2009,
the FASB issued Staff Position No. 107-1 and APB 28-1 (FSP FAS 107-1 and APB
28-1), Interim
Disclosures About Fair Value of Financial Instruments, effective for
interim and annual periods ending after June 15, 2009. The staff position requires fair value
disclosures of financial instruments on a quarterly basis, as well as new
disclosures regarding the methodology and significant assumptions underlying
the fair value measures and any changes to the methodology and assumptions
during the reporting period. The
Company has applied the disclosure provisions as appropriate.

In April 2009,
the FASB issued FASB Staff Position No. 115-2 and 124-2 (FSP FAS 115-2 and
124-2), Recognition
and Presentation of Other-Than-Temporary Impairments, which amends
the other-than-temporary impairment guidance for debt and equity securities.
FSP FAS 115-2 and 124-2 is effective for interim and annual reporting periods
ending after June 15, 2009. The adoption of this staff position did not have a
material impact on the Companys financial position or results of operation.

In April 2009,
the FASB issued FASB Staff Position No. 141(R)-1 (FSP 141(R)-1), Accounting
for Assets Acquired and Liabilities Assumed in a Business Combination That
Arise from Contingencies. FSP 141(R)-1 amends the provisions in
Statement 141(R) for the initial recognition and measurement, subsequent
measurement and accounting, and disclosures for assets and liabilities arising
from contingencies in business combinations. The FSP eliminates the distinction
between contractual and non-contractual contingencies, including the initial
recognition and measurement criteria in Statement 141(R) and instead carries
forward most of the provisions in SFAS 141 for acquired contingencies. FSP
141(R)-1 is effective for contingent assets and contingent liabilities acquired
in business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. The adoption of this staff position is not expected to have a
material impact on the Companys financial position or results of operation.

10

---



In April 2009,
the FASB issued FASB Staff Position No. 157-4 (FSP FAS 157-4), Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability
Have Significantly Decreased and Identifying Transactions That Are Not Orderly,
which provides additional guidance in accordance with FASB No. 157, Fair Value
Measurements. FSP FAS 157-4 is effective for interim and annual reporting
periods ending after June 15, 2009. The adoption of this staff position did not
have a material impact on the Companys financial position or results of
operation.

In May 2009,
the FASB issued Statement of Financial Accounting Standards No. 165 (FAS
165), Subsequent
Events, which establishes general statements of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. FAS 165 is
effective for interim annual reporting periods ending after June 15, 2009. The
adoption of this standard did not have a material impact on the companys
financial position or results of operation.

|                                                                                                                       
|-----------------------------------------------------------------------------------------------------------------------
|Note M  Subsequent Events                                                                                             
|                                                                                                                       
|                                                                                                                       
|Subsequent
 events have been evaluated through August 10, 2009 which is the date the
 financial statements were issued.

|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS

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, Escalades ability to successfully integrate the
operations of acquired assets and businesses, 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, Escalades ability to
obtain financing and to maintain compliance with the terms of such financing,
and other risks detailed from time to time in Escalades filings with the
Securities and Exchange Commission. Escalades future financial performance
could differ materially from the expectations of management contained herein.
Escalade undertakes no obligation to release revisions to these forward-looking
statements after the date of this report.

Overview

Escalade, Incorporated (Escalade or Company) manufactures and
distributes products for two industries: Sporting Goods and Office Products.
Within these industries the Company has successfully built a market presence in
niche markets. This strategy is heavily dependent on expanding the customer
base, barriers to entry, brand recognition and excellent customer service. A
key strategic advantage is the Companys established relationships with major
customers that allow the Company to bring new products to the market in a cost
effective manner while maintaining a diversified product line and wide customer
base. In addition to strategic customer relations, the Company has over 75
years of manufacturing and import experience that enable it to be a low cost
supplier.

Results of Operations

The
Companys operating income for the second quarter and first half of fiscal 2009
was $1,374 thousand and $746 thousand, respectively, compared to operating
losses of $(789) thousand and $(1,845) thousand for the same periods last year.
Net revenues for the second quarter and first half of fiscal 2009 declined
22.2% and 19.2%, respectively, compared to same periods last year; however, the
Company has achieved improved gross margins and lower selling, administrative
and general expenses mainly due to facility consolidation in the Sporting Goods
segment and Company-wide cost cutting measures implemented last year which have
dramatically improved Company profits.

11

---



The
following schedule sets forth certain consolidated statement of operations data
as a percentage of net revenue for the periods indicated:

|                                             |  |                    |       |                  |  |               |    |               |       |   |  |       |   
|-------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ------------- | -- | ------------- | ----- | - |  | ----- | --
|                                             |  | Three Months Ended |       | Six Months Ended | 
|                                             |  |                    |       |                  | 
|                                             |  | July 11, 2009      |       | July 12, 2008    |  | July 11, 2009 |    | July 12, 2008 |      
|                                             |  |                    |       |                  |  |               |    |               |      
|Net revenue                                  |  |                    | 100.0 | %                |  | 100.0         | %  |               | 100.0 | % |  | 100.0 | % 
|Cost of products sold                        |  |                    | 69.0  | %                |  | 72.7          | %  |               | 68.8  | % |  | 72.1  | % 
|                                             |  |                    |       |                  |  |               |    |               |       |   |  |       |   
|Gross margin                                 |  |                    | 31.0  | %                |  | 27.3          | %  |               | 31.2  | % |  | 27.9  | % 
|Selling, administrative and general expenses |  |                    | 24.5  | %                |  | 27.4          | %  |               | 27.7  | % |  | 28.8  | % 
|Amortization                                 |  |                    | 2.6   | %                |  | 1.6           | %  |               | 2.3   | % |  | 1.6   | % 
|                                             |  |                    |       |                  |  |               |    |               |       |   |  |       |   
|Operating income (loss)                      |  |                    | 3.9   | %                |  | (1.7          | )% |               | 1.2   | % |  | (2.5  | )%

Consolidated Revenue
and Gross Margin

Sales
in the Sporting Goods business declined 19.8% and 16.6% in the second quarter
and first half of fiscal 2009 respectively, compared to the same periods last
year. Based on the first half year results and product placement information,
the Company expects Sporting Goods sales to be approximately 20% lower in 2009
compared to 2008. The Company is continuing to identify and implement cost
saving initiatives and to enhance product design to expand market share to
improve Company profits.

Compared
to last year, Office Products sales declined 26.3% and 23.4% for the second
quarter and first half of fiscal 2009, respectively. Sales declined 21.8% in
the United States and 24.8% in Europe for the first half of 2009. The Company
expects sales declines for the remainder of 2009 to be relatively unchanged
from the decline experienced in the first half of fiscal 2009.

The
overall gross margin ratios for the second quarter and first half of fiscal
2009 were 3.7% and 3.3% higher, respectively, over the same periods last year
due to cost reductions and facility consolidations initiated in 2008 resulting
in positive production cost variances.

Consolidated Selling,
General and Administrative Expenses

Consolidated
selling, general and administrative expenses (SG&A) for the second quarter
and first half of fiscal 2009 were down 30.4% and 22.4%, respectively, compared
to the same periods last year. Excluding the effect of changes in foreign
currency rates, SG&A costs for the first half of fiscal 2009 were down
19.0% due mainly to decreases in variable compensation in relation to decreases
in sales volume and the continued benefit of personnel reductions and facility
consolidation initiated in 2008.

Provision for Income
Taxes

The effective tax rate for
the first half of 2009 for domestic operations was 37% compared with 38% for
the same period last year. As a result of net losses in certain foreign
countries where a tax benefit is not expected to be realized, the Company is
reporting a provision for income tax as of the end of the second quarter of
$150 thousand on pre-tax income of $77 thousand.

12

---



Financial Condition
and Liquidity

The
following schedule summarizes the Companys total debt:

|                         |  |               |        |               |   |                   |  |   |        | 
|------------------------ |  | ------------- | ------ | ------------- | - | ----------------- |  | - | ------ | 
|In thousands             |  | July 11, 2009 |        | July 12, 2008 |   | December 27, 2008 | 
|                         |  |               |        |               |   |                   | 
|                        
|Notes payable short-term |  | $             | 40,052 |               | $ | 52,345            |  | $ | 46,525 | 
|Long-term debt           |  |               |       |               |   | 2,737             |  |   |       | 
|                         |  |               |        |               |   |                   |  |   |        | 
|Total debt               |  | $             | 40,052 |               | $ | 55,082            |  | $ | 46,525 | 
|                         |  |               |        |               |   |                   |  |   |        | 

As a percentage of stockholders equity, total bank debt was 50%, 63%
and 59% at July 11, 2009, July 12, 2008 and December 27, 2008, respectively.

During the first half of 2009, operations provided $7.9 million in cash
primarily due to reductions in accounts receivable and inventory and income tax
refunds.

The
Companys working capital requirements are funded from operating cash flows and
revolving credit agreements with its primary bank. The Companys relationship
with its primary lending bank remains strong and the Company expects to have
access to the same level of revolving credit that was available in 2008.

During the first half of fiscal 2009, the Company finalized its new
credit agreement with JP Morgan Chase. As part of that agreement, the Company
consented to merge one of its subsidiaries, Indian Martin, Inc. into the parent
company, Escalade, Inc. The merger was completed during the second quarter of
2009. The Company is continuing to market the Reynosa facility through a
national broker and is pursuing all viable offers of purchase or lease. The
Company has completed the Mexico facility consolidation and is fully
operational at the Rosarito site. There have been no material changes to
previously identified cost reduction measures.

|        |                                                            
|------- | -----------------------------------------------------------
|ITEM 3. | QUANTITATIVE
 AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to
financial market risks, including changes in currency exchange rates, interest
rates and marketable equity security prices. To mitigate these risks, the
Company has utilized derivative financial instruments, among other strategies
but is not currently utilizing any derivative financial instruments. The
Company does not use derivative financial instruments for speculative purposes.

Interest Rates
The Companys exposure to market-rate risk for changes in interest rates
relates primarily to its revolving variable rate bank debt which is based on
both U.S. prime and LIBOR interest rates. A hypothetical 1% or 100 basis point
change in interest rates would not have a significant effect on our
consolidated financial position or results of operation.

Foreign Currency
The Company conducts business in various countries around the world and is
therefore subject to risks associated with fluctuating foreign exchange rates.
This revenue is generated from the operations of the Companys subsidiaries in
their respective countries and surrounding geographic areas and is primarily
denominated in each subsidiarys local functional currency. These subsidiaries
incur most of their expenses (other than inter-company expenses) in their local
functional currency and include the Euro, Great Britain Pound Sterling, Mexican
Peso, Chinese Yuan, Swedish Krona and South African Rand.

The geographic
areas outside the United States in which the Company operates are generally not
considered to be highly inflationary. Nonetheless, the Companys foreign
operations are sensitive to fluctuations in currency exchange rates arising
from, among other things, certain inter-company transactions that are
denominated in currencies other than the respective functional currency.
Operating results as well as assets and liabilities are also subject to the
effect of foreign currency translation when the operating results, assets and
liabilities of our foreign subsidiaries are translated into U.S. dollars in our
consolidated financial statements.

13

---



The Company
and its subsidiaries conduct substantially all of their business in their
respective functional currencies to avoid the effects of cross-border
transactions. To protect against reductions in value and the volatility of
future cash flows caused by changes in currency exchange rates, the Company
carefully considers the use of transaction and balance sheet hedging programs
such as matching assets and liabilities in the same currency. Such programs
reduce, but do not entirely eliminate, the impact of currency exchange rate
changes. The Company currently has no currency exchange hedging instruments in
place. Changes in currency exchange rates may be volatile and could affect the
Companys performance.

Marketable Securities
An adverse movement of equity market prices has impacted the Companys
long-term marketable equity securities available for sale that are included in
investments on the consolidated balance sheets. At July 11, 2009 the aggregate
fair market value of long-term marketable equity securities available for sale
was $1.4 million. The Company has not employed any hedge programs relative to
these investments.

|         |                         
|-------- | ------------------------
|ITEM 4T. | CONTROLS
 AND PROCEDURES

Evaluation of
Disclosure Controls and Procedures

Escalade maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Companys Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms, and that such information is
accumulated and communicated to the Companys management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based closely on the definition of
disclosure controls and procedures in 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 investments 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.

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 as of the end of the period covered by this report. Based on the
foregoing, the Companys Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures were effective.

Changes in Internal Control over Financial
Reporting

Management of
the Company has evaluated, with the participation of the Companys Chief
Executive Officer and Chief Financial Officer, changes in the Companys
internal controls over financial reporting (as defined in Rule 13a-15(f) and
15d-15(f) of the Exchange Act) during the second quarter of 2009.

There have
been no changes to the Companys internal control over financial reporting that
occurred since the beginning of the Companys second quarter of 2009 that have
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.

14

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PART II.     OTHER INFORMATION

|         |              
|-------- | -------------
|Item 1.  | Not Required.
|         |              
|Item 1A. | Risk Factors.

In addition to the following risk factors and the other information set
forth in this report, you should carefully consider the factors discussed in
Part I, Item 1A. Risk Factors in the Companys Annual Report on Form 10-K for
the year ended December 27, 2008 and in Part II, Item 1A. Risk Factors in the
Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March 21,
2009 (the 2009 First Quarter 10-Q) which could materially affect the
Companys business, financial condition or future results. The risks described
in the Companys Annual Report on Form 10-K, the 2009 First Quarter 10-Q, and
this Quarterly Report on Form 10-Q are not the only risks facing the Company.
Other than as modified below, the risk factors set forth in the Companys
Annual Report on Form 10-K and the 2009 First Quarter 10-Q have not materially
changed since March 27, 2009, the date the Company filed its Annual Report with
the SEC. Additional risks and uncertainties not currently known to the Company
or that the Company currently deems to be immaterial also may materially
adversely affect the Companys business, financial condition and/or operating
results.

The Company must maintain compliance with the
terms of its existing credit facilities. The failure to do so could have a
material adverse effect on the Companys ability to finance its ongoing
operations and the Company may not be able to find an alternative lending
source if a default would occur.

On April 30, 2009, the Company entered into a new secured, senior
revolving credit facility with its existing lender, JPMorgan Chase Bank, N.A.
Upon doing so, the Company was able to negotiate new terms in order to cure the
Companys previous non-compliance with the leverage ratio and debt service
ratio covenants contained in the Companys prior credit facility. There can be
no assurances that the Company will be able to maintain compliance with all of
the covenants and other terms and conditions of this credit facility on an
ongoing basis. If not, the Company could be required to pay back the amounts
borrowed on an accelerated basis, which could subject the Company to decreased
liquidity and other negative impacts on the Companys business, results of
operations and financial condition. Furthermore, if the Company would need to
find an alternative lending source, the Company may have difficulty in doing
so, particularly in the current credit environment which is not favorable to
borrowers. Without a sufficient credit facility, the Company would be adversely
affected by a lack of access to liquidity needed to operate the Companys
business. Any disruption in access to credit could force the Company to take
additional measures to conserve cash, which measures could have a material
adverse effect on the Company.

The Company may not be able to remain in
compliance with NASDAQ requirements for continued listing of common stock.

The Companys common stock may not remain in compliance with NASDAQ
rules for continued listing on the NASDAQ Global Market and could be at risk of
being delisted. Over the past eight months, the Companys common stock has not
always maintained a minimum $1.00 per share bid price for the prior 30
consecutive business days as required by NASDAQ Marketplace Rule 5450(a)(1).
Additionally, the Companys common stock is currently at risk of not complying
with NASDAQ Marketplace Rule 5450(b)(1) relating to continued listing on the
NASDAQ Global Market. In accordance with Marketplace Rule 5450(b)(1), companies
must, among other requirements, maintain a market value of publicly held shares
of at least $5,000,000. Although the bid price for the Companys stock has been
$1.00 or greater within the last 30 business days and the market value of the
Companys publicly held shares currently exceeds $5,000,000, the Company cannot
provide any assurance it will be able to meet these requirements in the future.

Through July 31, 2009, NASDAQ suspended enforcement of the bid price
and market value of publicly held shares requirements. Now that these
requirements are no longer suspended, if the Company would fail to comply with
Marketplace Rule 5450(a)(1) or 5450(b)(1), it would have 180 days or 90 days,
respectively, to regain compliance. There is no guarantee that the Company will
be able to meet the bid price or market value of publicly held shares
requirements. This may subject the Company to the risk of being delisted and
would result in decreased liquidity of common stock.

15

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The Company is no longer actively considering
the potential for voluntary delisting of its common stock with NASDAQ or
suspension of its SEC reporting obligations.

The Company reported in its Form 10-K for the year ended December 27,
2008 that the Companys Board of Directors and management were in the process
of exploring the advantages and disadvantages to the Company and its
stockholders if the Company would no longer be a public reporting company.
The Companys Board has determined at this time that the Company will continue
to be a public reporting company. The Companys Board of Directors may again
consider this alternative in the future, but is no longer actively considering
a voluntary delisting from NASDAQ nor the suspension of the Companys periodic
reporting obligations imposed by the Securities Exchange Act of 1934, as
amended. Nonetheless, as indicated in the preceding risk factor, there can be
no assurance that the Company will remain eligible for listing on NASDAQ. In
addition, there can be no assurance that the Company will remain eligible to
suspend its periodic reporting obligations in the event that the number of the
Companys stockholders of record would be 300 or greater in the future.

The market price of common stock is likely to
be highly volatile as the stock market in general can be highly volatile.

The public trading of common stock is based on many factors, which
could cause fluctuation in the Companys stock price. These factors may include,
among other things:

| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | General economic and market conditions;                                                                                                                                                                                                      
| | · | Actual or anticipated variations in quarterly operating results;                                                                                                                                                                             
| | · | Lack of research coverage by securities analysts;                                                                                                                                                                                            
| | · | If securities analysts provide coverage, our inability to meet or exceed
 securities analysts estimates or expectations;                                                                                                                    
| | · | Conditions or trends in our industry;                                                                                                                                                                                                        
| | · | Changes in the market valuations of other companies in our industry;                                                                                                                                                                         
| | · | Announcements by us or our competitors of significant acquisitions,
 strategic partnerships, divestitures, joint ventures or other strategic
 initiatives;                                                                                   
| | · | Capital commitments;                                                                                                                                                                                                                         
| | · | Additions or departures of key personnel;                                                                                                                                                                                                    
| | · | Sales and repurchases of our common stock; and                                                                                                                                                                                               
| | · | The potential delisting of the Companys common stock from NASDAQ
 and/or the current decision of the Board to continue to be a public reporting
 company as discussed in the two risk factors set forth immediately above this
 risk factor.

Many of these factors are beyond the Companys control. These factors
may cause the market price of the Companys common stock to decline, regardless
of operating performance.

16

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|            |                                      
|----------- | -------------------------------------
|Item 2. (c) | ISSUER PURCHASES OF EQUITY SECURITIES

|                                                                            |  |                                                  |         |                                             |   |                                                                                                   |  |                                                                                                                               |            |  |   |            | 
|--------------------------------------------------------------------------- |  | ------------------------------------------------ | ------- | ------------------------------------------- | - | ------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------- | ---------- |  | - | ---------- | 
|Period                                                                      |  | (a)
 Total Number of Shares (or Units) Purchased |         | (b)
 Average Price Paid per Share (or Unit) |   | (c)
 Total Number of Shares (or Units) Purchased as Part of Publicly Announced
 Plans or Programs |  | (d)
 Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May
 Yet Be Purchased Under the Plans or Programs |           
|                                                                            |  |                                                  |         |                                             |   |                                                                                                   |  |                                                                                                                               |           
|Shares purchased prior to 03/21/2009 under the current repurchase
 program. |  |                                                  | 982,916 |                                             | $ | 8.84                                                                                              |  |                                                                                                                               | 982,916    |  | $ | 2,273,939  | 
|                                                                            |  |                                                  |         |                                             |   |                                                                                                   |  |                                                                                                                               |            |  |   |            | 
|                                                                           
|Second quarter purchases:                                                   |  |                                                  |         |                                             |   |                                                                                                   |  |                                                                                                                               |            |  |   |            | 
|03/22/2009  04/18/2009                                                     |  |                                                  | None    |                                             |   | None                                                                                              |  |                                                                                                                               | No
 change |  |   | No
 change | 
|04/19/2009  05/16/2009                                                     |  |                                                  | None    |                                             |   | None                                                                                              |  |                                                                                                                               | No
 change |  |   | No
 change | 
|05/17/2009  06/13/2009                                                     |  |                                                  | None    |                                             |   | None                                                                                              |  |                                                                                                                               | No
 change |  |   | No
 change | 
|06/14/2009  07/11/2009                                                     |  |                                                  | None    |                                             |   | None                                                                                              |  |                                                                                                                               | No
 change |  |   | No
 change | 
|                                                                            |  |                                                  |         |                                             |   |                                                                                                   |  |                                                                                                                               |            |  |   |            | 
|                                                                           
|Total share purchases under the current program                             |  |                                                  | 982,916 |                                             | $ | 8.84                                                                                              |  |                                                                                                                               | 982,916    |  | $ | 2,273,939  | 
|                                                                            |  |                                                  |         |                                             |   |                                                                                                   |  |                                                                                                                               |            |  |   |            | 

The Company has one stock
repurchase program which was established in February 2003 by the Board of
Directors and which authorized management to expend up to $3,000,000 to
repurchase shares on the open market as well as in private negotiated
transactions. The repurchase plan has no termination date. There have been no
share repurchases that were not part of a publicly announced program. In
February 2008, the Board of Directors increased the remaining amount on this
plan to its original level of $3,000,000.

|        |                                                      
|------- | -----------------------------------------------------
|Item 3. | Not
 Required.                                       
|        |                                                      
|Item 4. | Submission
 of Matters to a Vote of Security Holders.

The annual meeting of the Companys
stockholders was held on April 24, 2009. The Company previously reported the
results of the matters voted on at such annual meeting in Part II, Item 4, of
the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March
21, 2009, which Item 4 is incorporated herein by reference.


|        |              
|------- | -------------
|Item 5. | Not Required.

17

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|        |         
|------- | --------
|Item 6. | Exhibits

Exhibits

| |        |  |                                                                                                                                                                                                                      
| | ------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Number |  | Description                                                                                                                                                                                                          
| |        |  |                                                                                                                                                                                                                      
| | 10.1   |  | Credit Agreement dated as
 of April 30, 2009 among Escalade, Incorporated and JPMorgan Chase Bank, N.A.
 (without exhibits and schedules, which Escalade has determined are not
 material). (1)                      
| |        |  |                                                                                                                                                                                                                      
| | 10.2   |  | Pledge and Security
 Agreement dated as of April 30, 2009 by and between Escalade, Incorporated
 and JPMorgan Chase Bank, N.A. (without exhibits and schedules, which Escalade
 has determined are not material). (1)
| |        |  |                                                                                                                                                                                                                      
| | 10.3   |  | Form of Pledge and
 Security Agreement dated as of April 30, 2009 with JPMorgan Chase Bank, N.A.
 (1) (2)                                                                                                            
| |        |  |                                                                                                                                                                                                                      
| | 10.4   |  | Form of Unlimited
 Continuing Guaranty dated as of April 30, 2009 in favor of JPMorgan Chase
 Bank, N.A. (1) (2)                                                                                                     
| |        |  |                                                                                                                                                                                                                      
| | 10.5   |  | First Amendment dated as
 of July 29, 2009 to Credit Agreement by and between Escalade, Incorporated
 and JPMorgan Chase Bank, N.A. (3)                                                                              
| |        |  |                                                                                                                                                                                                                      
| | 31.1   |  | Chief Executive Officer
 Rule 13a-14(a)/15d-14(a) Certification.                                                                                                                                                     
| |        |  |                                                                                                                                                                                                                      
| | 31.2   |  | Chief Financial Officer
 Rule 13a-14(a)/15d-14(a) Certification.                                                                                                                                                     
| |        |  |                                                                                                                                                                                                                      
| | 32.1   |  | Chief Executive Officer
 Section 1350 Certification.                                                                                                                                                                 
| |        |  |                                                                                                                                                                                                                      
| | 32.2   |  | Chief Financial Officer
 Section 1350 Certification.                                                                                                                                                                 

(1)     Incorporated
by reference from the Companys Form 8-K filed on May 6, 2009.

(2)     Each
of Escalades eleven domestic subsidiaries has entered into the identical form
of Pledge and Security Agreement and form of Unlimited Continuing Guaranty.
Those eleven domestic subsidiaries are: Indian Industries, Inc.; Harvard
Sports, Inc.; Martin Yale Industries, Inc.; U.S. Weight, Inc.; Bear Archery,
Inc.; Escalade Sports Playground, Inc.; Schleicher & Co. America, Inc.;
Olympia Business Systems, Inc.; EIM Company, Inc.; SOP Services, Inc.; and
Escalade Insurance, Inc.

(3)     Incorporated
by reference from the Companys Form 8-K filed on July 30, 2009.

SIGNATURE

Pursuant to the requirements
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     
|                      |                            
|Date: August 10, 2009 | /s/ Deborah Meinert        
|                      |                            
|                      | Vice
 President Finance and
|                      | Chief
 Financial Officer   

18

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