##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 o
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended July 4, 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: 333-123927
 EASTON-BELL SPORTS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    20-1636283(I.R.S. Employer
Identification No.)
 
 7855 Haskell Avenue, Suite 200
Van Nuys, California 91406  (Address of principal executive offices)(Zip Code)
 (818) 902-5800  (Registrants telephone number, including area code)
 
 o þ
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)Smaller reporting company o
 o þ




---



##### 



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATION:Item 1. Financial StatementsConsolidated Balance Sheets as of July 4, 2009 (unaudited) and January 3, 2009
    
    
    3Consolidated Statements of Operations and Comprehensive Income for the Fiscal Quarter
and Two Fiscal Quarters Ended July 4, 2009 (unaudited) and June 28, 2008 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Two Fiscal Quarters Ended July 4, 2009
(unaudited) and June 28, 2008 (unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    30PART II. OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    31Item 1A. Risk Factors
    
    
    31Item 6. Exhibits
    
    
    31SIGNATURES
    
    
    32EX-31.1EX-31.2EX-32.1
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
 July 4,
    
    
    January 3,2009
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    52,453
    
    
    $
    41,301Accounts receivable, net
    
    
    226,908
    
    
    
    213,561Inventories, net
    
    
    139,990
    
    
    
    147,163Prepaid expenses
    
    
    4,426
    
    
    
    8,183Deferred taxes
    
    
    9,128
    
    
    
    9,128Other current assets
    
    
    8,263
    
    
    
    7,605Total current assets
    
    
    441,168
    
    
    
    426,941Property, plant and equipment, net
    
    
    46,747
    
    
    
    45,874Deferred financing fees, net
    
    
    10,266
    
    
    
    12,055Intangible assets, net
    
    
    297,115
    
    
    
    303,818Goodwill
    
    
    203,541
    
    
    
    203,456Other assets
    
    
    1,327
    
    
    
    5,501Total assets
    
    $
    1,000,164
    
    
    $
    997,645LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    3,350
    
    
    $
    12,405Current portion of capital lease obligations
    
    
    21
    
    
    
    22Accounts payable
    
    
    78,490
    
    
    
    81,245Accrued expenses
    
    
    47,527
    
    
    
    50,397Total current liabilities
    
    
    129,388
    
    
    
    144,069Long-term debt, less current portion
    
    
    451,650
    
    
    
    443,383Capital lease obligations, less current portion
    
    
    112
    
    
    
    123Deferred taxes
    
    
    41,185
    
    
    
    39,794Other noncurrent liabilities
    
    
    22,115
    
    
    
    23,252Total liabilities
    
    
    644,450
    
    
    
    650,621Stockholders equity:Common stock: $0.01 par value, 100 shares
authorized, 100 shares issued and
outstanding at July 4, 2009 and January 3,
2009
    
    
    
    
    
    
    Additional paid-in capital
    
    
    343,051
    
    
    
    341,197Retained earnings
    
    
    16,239
    
    
    
    11,373Accumulated other comprehensive loss
    
    
    (3,576
    )
    
    
    (5,546
    )Total stockholders equity
    
    
    355,714
    
    
    
    347,024Total liabilities and stockholders equity
    
    $
    1,000,164
    
    
    $
    997,645
  3




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited and amounts in thousands)
 Fiscal Quarter Ended
    
    
    Two Fiscal Quarters EndedJuly 4,
    
    
    June 28,
    
    
    July 4,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    187,295
    
    
    $
    220,810
    
    
    $
    372,146
    
    
    $
    402,949Cost of sales
    
    
    126,889
    
    
    
    139,398
    
    
    
    251,565
    
    
    
    260,517Gross profit
    
    
    60,406
    
    
    
    81,412
    
    
    
    120,581
    
    
    
    142,432Selling, general and administrative expenses
    
    
    42,270
    
    
    
    46,004
    
    
    
    89,165
    
    
    
    89,639Restructuring and other infrequent expenses
    
    
    
    
    
    
    317
    
    
    
    
    
    
    
    492Amortization of intangibles
    
    
    3,351
    
    
    
    3,352
    
    
    
    6,703
    
    
    
    6,704Income from operations
    
    
    14,785
    
    
    
    31,739
    
    
    
    24,713
    
    
    
    45,597Interest expense, net
    
    
    7,726
    
    
    
    2,370
    
    
    
    16,053
    
    
    
    12,167Income before income taxes
    
    
    7,059
    
    
    
    29,369
    
    
    
    8,660
    
    
    
    33,430Income tax expense
    
    
    3,168
    
    
    
    13,909
    
    
    
    3,794
    
    
    
    15,575Net income
    
    
    3,891
    
    
    
    15,460
    
    
    
    4,866
    
    
    
    17,855Other comprehensive income:Foreign currency translation adjustment
    
    
    2,828
    
    
    
    119
    
    
    
    1,970
    
    
    
    (702
    )Comprehensive income
    
    $
    6,719
    
    
    $
    15,579
    
    
    $
    6,836
    
    
    $
    17,153
  4




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and amounts in thousands)
 Two Fiscal Quarters EndedJuly 4,
    
    
    June 28,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    4,866
    
    
    $
    17,855Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    14,113
    
    
    
    12,614Amortization of deferred financing fees
    
    
    1,789
    
    
    
    1,789Equity compensation expense
    
    
    1,854
    
    
    
    1,843Deferred income tax expense
    
    
    1,391
    
    
    
    13,819Disposal of property, plant and equipment
    
    
    3
    
    
    
    4Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (12,597
    )
    
    
    (44,155
    )Inventories, net
    
    
    7,649
    
    
    
    19,102Other current and noncurrent assets
    
    
    7,188
    
    
    
    (5,097
    )Accounts payable
    
    
    (2,903
    )
    
    
    (1,329
    )Accrued expenses
    
    
    (3,095
    )
    
    
    5,716Other current and noncurrent liabilities
    
    
    (1,137
    )
    
    
    2,730Net cash provided by operating activities
    
    
    19,121
    
    
    
    24,891Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (8,179
    )
    
    
    (6,718
    )Net cash used in investing activities
    
    
    (8,179
    )
    
    
    (6,718
    )Cash flows from financing activities:Payments on senior term notes
    
    
    (788
    )
    
    
    (1,675
    )Proceeds from revolving credit facility
    
    
    6,000
    
    
    
    23,000Payments on revolving credit facility
    
    
    (6,000
    )
    
    
    (28,500
    )Payments on capital lease obligations
    
    
    (12
    )
    
    
    (11
    )Net cash used in financing activities
    
    
    (800
    )
    
    
    (7,186
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    1,010
    
    
    
    266Increase in cash and cash equivalents
    
    
    11,152
    
    
    
    11,253Cash and cash equivalents, beginning of period
    
    
    41,301
    
    
    
    16,923Cash and cash equivalents, end of period
    
    $
    52,453
    
    
    $
    28,176
  5




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 1. Basis of Presentation
    2. Goodwill and Other Intangible Assets
  July 4, 2009
    
    
    January 3, 2009Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmounts
    
    
    Amortization
    
    
    Amounts
    
    
    AmortizationAmortizable intangible assets:Trademarks and tradenames
    
    $
    1,702
    
    
    $
    (1,456
    )
    
    $
    1,702
    
    
    $
    (1,333
    )Customer relationships
    
    
    59,180
    
    
    
    (28,205
    )
    
    
    59,180
    
    
    
    (25,484
    )Patents
    
    
    60,345
    
    
    
    (26,587
    )
    
    
    60,345
    
    
    
    (23,358
    )Licensing and other
    
    
    5,900
    
    
    
    (4,148
    )
    
    
    5,900
    
    
    
    (3,518
    )Total
    
    $
    127,127
    
    
    $
    (60,396
    )
    
    $
    127,127
    
    
    $
    (53,693
    )Indefinite-lived intangible assets:Trademarks and tradenames
    
    $
    230,384
    
    
    
    
    
    
    $
    230,384
  Team
    
    
    ActionSports
    
    
    Sports
    
    
    ConsolidatedBalance as of January 3, 2009
    
    $
    141,992
    
    
    $
    61,464
    
    
    $
    203,456Adjustment to purchase price allocations
    
    
    85
    
    
    
    
    
    
    
    85Balance as of July 4, 2009
    
    $
    142,077
    
    
    $
    61,464
    
    
    $
    203,541
 Goodwill and Other Intangible Assets
  6




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 3. Long-Term Debt
  July 4, 2009
    
    
    January 3, 2009Senior Secured Credit Facility:Term loan facility
    
    $
    315,000
    
    
    $
    315,7888.375% Senior subordinated notes due 2012
    
    
    140,000
    
    
    
    140,000Capital lease obligations
    
    
    133
    
    
    
    145Total long-term debt
    
    
    455,133
    
    
    
    455,933Less current maturities of long-term debt
    
    
    (3,371
    )
    
    
    (12,427
    )Long-term debt, less current portion
    
    $
    451,762
    
    
    $
    443,506
 Senior Secured Credit Facility
     7




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
    Senior Subordinated Notes
    8




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Other
   4. Accrued Expenses
  July 4, 2009
    
    
    January 3, 2009Salaries, wages, commissions and bonuses
    
    $
    10,266
    
    
    $
    13,717Advertising
    
    
    4,433
    
    
    
    4,919Rebates
    
    
    4,667
    
    
    
    4,160Warranty
    
    
    3,823
    
    
    
    3,663Product liability  current portion
    
    
    3,894
    
    
    
    3,647Royalties
    
    
    1,441
    
    
    
    1,771Interest
    
    
    4,866
    
    
    
    6,335Income taxes
    
    
    2,744
    
    
    
    1,563Other
    
    
    11,393
    
    
    
    10,622Total accrued expenses
    
    $
    47,527
    
    
    $
    50,397
 5. Inventories
   July 4, 2009
    
    
    January 3, 2009Raw materials
    
    $
    21,398
    
    
    $
    17,083Work-in-process
    
    
    3,037
    
    
    
    2,567Finished goods
    
    
    115,555
    
    
    
    127,513Inventories, net
    
    $
    139,990
    
    
    $
    147,163
 6. Recent Accounting Pronouncements
 Interim Disclosures about Fair Value of Financial Instruments
 Subsequent Events
 9




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 , The Hierarchy of Generally Accepted Accounting
Principles, FASB Accounting Standards Codification
 7. Segment Reporting
   Team
    
    ActionFiscal Quarter Ended
    
    Sports
    
    Sports
    
    ConsolidatedJuly 4, 2009Net sales
    
    $
    100,821
    
    
    $
    86,474
    
    
    $
    187,295Income from operations
    
    
    13,471
    
    
    
    10,407
    
    
    
    23,878Depreciation
    
    
    2,390
    
    
    
    1,650
    
    
    
    4,040Capital expenditures
    
    
    2,439
    
    
    
    2,065
    
    
    
    4,504June 28, 2008Net sales
    
    $
    132,305
    
    
    $
    88,505
    
    
    $
    220,810Income from operations
    
    
    30,765
    
    
    
    9,184
    
    
    
    39,949Depreciation
    
    
    1,546
    
    
    
    1,440
    
    
    
    2,986Capital expenditures
    
    
    2,337
    
    
    
    812
    
    
    
    3,149
 Team
    
    ActionTwo Fiscal Quarters Ended
    
    Sports
    
    Sports
    
    ConsolidatedJuly 4, 2009Net sales
    
    $
    208,632
    
    
    $
    163,514
    
    
    $
    372,146Income from operations
    
    
    27,015
    
    
    
    16,604
    
    
    
    43,619Depreciation
    
    
    4,266
    
    
    
    3,144
    
    
    
    7,410Capital expenditures
    
    
    5,093
    
    
    
    3,086
    
    
    
    8,179June 28, 2008Net sales
    
    $
    233,088
    
    
    $
    169,861
    
    
    $
    402,949Income from operations
    
    
    46,126
    
    
    
    16,550
    
    
    
    62,676Depreciation
    
    
    3,050
    
    
    
    2,860
    
    
    
    5,910Capital expenditures
    
    
    4,611
    
    
    
    2,107
    
    
    
    6,718
 Team
    
    ActionSports
    
    Sports
    
    ConsolidatedAssetsAs of July 4, 2009
    
    $
    617,280
    
    
    $
    382,884
    
    
    $
    1,000,164As of January 3, 2009
    
    
    609,793
    
    
    
    387,852
    
    
    
    997,645
 10




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
  Fiscal Quarter Ended
    
    
    Two Fiscal Quarters EndedJuly 4, 2009
    
    
    June 28, 2008
    
    
    July 4, 2009
    
    
    June 28, 2008Segment income from operations
    
    $
    23,878
    
    
    $
    39,949
    
    
    $
    43,619
    
    
    $
    62,676Equity compensation expense
    
    
    (927
    )
    
    
    (1,011
    )
    
    
    (1,854
    )
    
    
    (1,843
    )Corporate expenses
    
    
    (4,815
    )
    
    
    (3,530
    )
    
    
    (10,349
    )
    
    
    (8,040
    )Restructuring and other infrequent expenses
    
    
    
    
    
    
    (317
    )
    
    
    
    
    
    
    (492
    )Amortization of intangibles
    
    
    (3,351
    )
    
    
    (3,352
    )
    
    
    (6,703
    )
    
    
    (6,704
    )Consolidated income from operations
    
    $
    14,785
    
    
    $
    31,739
    
    
    $
    24,713
    
    
    $
    45,597
 8. Product Liability, Litigation and Other Contingencies
 Product Liability
   Litigation and Other Contingencies
  9. Income Taxes
  11




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 10. Derivative Instruments and Hedging Activity
 Accounting for Derivative Instruments and Hedging Activities
  Fair Value Measurements
      
 12




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
    Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableIdentical Assets
    
    
    Observable Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:None
    
    $
    
    
    
    $
    
    
    
    $
    Liabilities:Interest rate swap
    
    $
    
    
    
    $
    7,647
    
    
    $
    Foreign currency exchange forward contracts
    
    
    
    
    
    
    459
    
    
    
    Total
    
    $
    
    
    
    $
    8,106
    
    
    $
    
 Fair Value of Financial Instruments
   July 4, 2009
    
    January 3, 2009Carrying Amount
    
    Fair Value
    
    Carrying Amount
    
    Fair ValueFinancial liabilities:Term loan facility
    
    $
    316,719
    
    
    $
    291,358
    
    
    $
    319,076
    
    
    $
    219,3158.375% senior subordinated notes
    
    
    143,141
    
    
    
    125,174
    
    
    
    143,044
    
    
    
    101,044
 11. Equity-Based Employee Compensation
  13




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Share Based Payment Accounting for Stock Based
Compensation Shared Based Payment
  Two Fiscal Quarters EndedJune 28, 2008Expected term
    
    4 yearsDividend yield
    
    
    0.0
    %Forfeiture rate
    
    
    7.7
    %Risk-free interest rate
    
    
    1.5 to 2.0
    %Expected volatility(1)
    
    
    39.0 to 46.0
    %
 
 (1)
    
    Expected volatility is based upon a peer group of companies given no
historical data for the Units.   Fiscal Quarter Ended
    
    
    Two Fiscal Quarters EndedJuly 4, 2009
    
    
    June 28, 2008
    
    
    July 4, 2009
    
    
    June 28, 2008Equity compensation expense
    
    $
    927
    
    
    $
    1,011
    
    
    $
    1,854
    
    
    $
    1,843
   Weighted AverageNumber of
    
    Grant DateUnits
    
    Fair ValueOutstanding at January 3, 2009
    
    
    27,898,556
    
    
    $
    1.90Forfeited
    
    
    (210,000
    )
    
    $
    1.76Outstanding at April 4, 2009
    
    
    27,688,556
    
    
    $
    1.90Granted
    
    
    
    
    
    $
    Forfeited
    
    
    
    
    
    $
    Outstanding at July 4, 2009
    
    
    27,688,556
    
    
    $
    1.90Vested Units at July 4, 2009
    
    
    12,060,700
    
    
    $
    1.98
 14




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 12. Warranty Obligations
   2009
    
    
    2008Beginning of fiscal year
    
    $
    3,663
    
    
    $
    3,390Warranty costs incurred during the period
    
    
    (991
    )
    
    
    (1,307
    )Warranty cost liability recorded during the period
    
    
    1,019
    
    
    
    1,425End of first fiscal quarter
    
    
    3,691
    
    
    
    3,508Warranty costs incurred during the period
    
    
    (1,301
    )
    
    
    (2,115
    )Warranty cost liability recorded during the period
    
    
    1,433
    
    
    
    2,357End of second fiscal quarter
    
    $
    3,823
    
    
    $
    3,750
 13. Related Party Transactions
   Easton Easton
 15




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
     14. Subsequent Events
  15. Supplemental Guarantor Condensed Financial Information
   16




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Condensed Consolidating Balance Sheet
July 4, 2009
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    30,818
    
    
    $
    11,842
    
    
    $
    9,793
    
    
    $
    
    
    
    $
    52,453Accounts receivable, net
    
    
    
    
    
    
    185,483
    
    
    
    41,425
    
    
    
    
    
    
    
    226,908Inventories, net
    
    
    
    
    
    
    121,188
    
    
    
    18,802
    
    
    
    
    
    
    
    139,990Prepaid expenses
    
    
    600
    
    
    
    3,418
    
    
    
    408
    
    
    
    
    
    
    
    4,426Deferred taxes
    
    
    
    
    
    
    9,128
    
    
    
    
    
    
    
    
    
    
    
    9,128Other current assets
    
    
    
    
    
    
    7,258
    
    
    
    1,005
    
    
    
    
    
    
    
    8,263Total current assets
    
    
    31,418
    
    
    
    338,317
    
    
    
    71,433
    
    
    
    
    
    
    
    441,168Property, plant and equipment, net
    
    
    18,241
    
    
    
    27,673
    
    
    
    833
    
    
    
    
    
    
    
    46,747Deferred financing fees, net
    
    
    10,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,266Investments and intercompany receivables
    
    
    399,541
    
    
    
    81,881
    
    
    
    30,826
    
    
    
    (512,248
    )
    
    
    Intangible assets, net
    
    
    
    
    
    
    291,173
    
    
    
    5,942
    
    
    
    
    
    
    
    297,115Goodwill
    
    
    16,195
    
    
    
    182,155
    
    
    
    5,191
    
    
    
    
    
    
    
    203,541Other assets
    
    
    
    
    
    
    1,303
    
    
    
    24
    
    
    
    
    
    
    
    1,327Total assets
    
    $
    475,661
    
    
    $
    922,502
    
    
    $
    114,249
    
    
    $
    (512,248
    )
    
    $
    1,000,164LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    3,350
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,350Revolving credit facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Current portion of capital lease obligations
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Accounts payable
    
    
    
    
    
    
    67,663
    
    
    
    10,827
    
    
    
    
    
    
    
    78,490Accrued expenses
    
    
    7,786
    
    
    
    32,125
    
    
    
    7,616
    
    
    
    
    
    
    
    47,527Total current liabilities
    
    
    11,136
    
    
    
    99,809
    
    
    
    18,443
    
    
    
    
    
    
    
    129,388Long-term debt, less current portion
    
    
    451,650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    451,650Capital lease obligations, less current portion
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    112Deferred taxes
    
    
    
    
    
    
    41,185
    
    
    
    
    
    
    
    
    
    
    
    41,185Other noncurrent liabilities
    
    
    
    
    
    
    14,682
    
    
    
    7,433
    
    
    
    
    
    
    
    22,115Long-term intercompany payables
    
    
    
    
    
    
    447,863
    
    
    
    29,773
    
    
    
    (477,636
    )
    
    
    Total liabilities
    
    
    462,786
    
    
    
    603,651
    
    
    
    55,649
    
    
    
    (477,636
    )
    
    
    644,450Total stockholders equity
    
    
    12,875
    
    
    
    318,851
    
    
    
    58,600
    
    
    
    (34,612
    )
    
    
    355,714Total liabilities and stockholders equity
    
    $
    475,661
    
    
    $
    922,502
    
    
    $
    114,249
    
    
    $
    (512,248
    )
    
    $
    1,000,164
 17




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Condensed Consolidating Balance Sheet
January 3, 2009
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    14,829
    
    
    $
    9,823
    
    
    $
    16,649
    
    
    $
    
    
    
    $
    41,301Accounts receivable, net
    
    
    
    
    
    
    190,615
    
    
    
    22,946
    
    
    
    
    
    
    
    213,561Inventories, net
    
    
    
    
    
    
    133,933
    
    
    
    13,230
    
    
    
    
    
    
    
    147,163Prepaid expenses
    
    
    1,246
    
    
    
    6,638
    
    
    
    299
    
    
    
    
    
    
    
    8,183Deferred taxes
    
    
    
    
    
    
    9,128
    
    
    
    
    
    
    
    
    
    
    
    9,128Other current assets
    
    
    
    
    
    
    7,492
    
    
    
    113
    
    
    
    
    
    
    
    7,605Total current assets
    
    
    16,075
    
    
    
    357,629
    
    
    
    53,237
    
    
    
    
    
    
    
    426,941Property, plant and equipment, net
    
    
    16,884
    
    
    
    28,105
    
    
    
    885
    
    
    
    
    
    
    
    45,874Deferred financing fees, net
    
    
    12,055
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,055Investments and intercompany receivables
    
    
    407,926
    
    
    
    97,353
    
    
    
    5,352
    
    
    
    (510,631
    )
    
    
    Intangible assets, net
    
    
    
    
    
    
    297,740
    
    
    
    6,078
    
    
    
    
    
    
    
    303,818Goodwill
    
    
    16,195
    
    
    
    182,070
    
    
    
    5,191
    
    
    
    
    
    
    
    203,456Other assets
    
    
    5,501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,501Total assets
    
    $
    474,636
    
    
    $
    962,897
    
    
    $
    70,743
    
    
    $
    (510,631
    )
    
    $
    997,645LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    12,405
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,405Current portion of capital lease obligations
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22Accounts payable
    
    
    
    
    
    
    76,438
    
    
    
    4,807
    
    
    
    
    
    
    
    81,245Accrued expenses
    
    
    3,118
    
    
    
    38,881
    
    
    
    8,398
    
    
    
    
    
    
    
    50,397Total current liabilities
    
    
    15,523
    
    
    
    115,341
    
    
    
    13,205
    
    
    
    
    
    
    
    144,069Long-term debt, less current portion
    
    
    443,383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    443,383Capital lease obligations, less current portion
    
    
    
    
    
    
    123
    
    
    
    
    
    
    
    
    
    
    
    123Deferred taxes
    
    
    
    
    
    
    39,794
    
    
    
    
    
    
    
    
    
    
    
    39,794Other noncurrent liabilities
    
    
    
    
    
    
    15,819
    
    
    
    7,433
    
    
    
    
    
    
    
    23,252Long-term intercompany payables
    
    
    
    
    
    
    477,636
    
    
    
    
    
    
    
    (477,636
    )
    
    
    Total liabilities
    
    
    458,906
    
    
    
    648,713
    
    
    
    20,638
    
    
    
    (477,636
    )
    
    
    650,621Total stockholders equity
    
    
    15,730
    
    
    
    314,184
    
    
    
    50,105
    
    
    
    (32,995
    )
    
    
    347,024Total liabilities and stockholders equity
    
    $
    474,636
    
    
    $
    962,897
    
    
    $
    70,743
    
    
    $
    (510,631
    )
    
    $
    997,645
 18




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Condensed Consolidating Statement of Operations
Fiscal Quarter Ended July 4, 2009
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    169,934
    
    
    $
    26,555
    
    
    $
    (9,194
    )
    
    $
    187,295Cost of sales
    
    
    
    
    
    
    117,037
    
    
    
    19,046
    
    
    
    (9,194
    )
    
    
    126,889Gross profit
    
    
    
    
    
    
    52,897
    
    
    
    7,509
    
    
    
    
    
    
    
    60,406Selling, general and administrative expenses
    
    
    7,028
    
    
    
    32,608
    
    
    
    2,634
    
    
    
    
    
    
    
    42,270Amortization of intangibles
    
    
    
    
    
    
    3,351
    
    
    
    
    
    
    
    
    
    
    
    3,351(Loss) income from operations
    
    
    (7,028
    )
    
    
    16,938
    
    
    
    4,875
    
    
    
    
    
    
    
    14,785Interest expense, net
    
    
    7,511
    
    
    
    216
    
    
    
    (1
    )
    
    
    
    
    
    
    7,726Share of net income (loss) of subsidiaries
under equity method
    
    
    18,430
    
    
    
    3,292
    
    
    
    
    
    
    
    (21,722
    )
    
    
    Income (loss) before income taxes
    
    
    3,891
    
    
    
    20,014
    
    
    
    4,876
    
    
    
    (21,722
    )
    
    
    7,059Income tax expense
    
    
    
    
    
    
    1,584
    
    
    
    1,584
    
    
    
    
    
    
    
    3,168Net income (loss)
    
    $
    3,891
    
    
    $
    18,430
    
    
    $
    3,292
    
    
    $
    (21,722
    )
    
    $
    3,891
 Condensed Consolidating Statement of Operations
Fiscal Quarter Ended June 28, 2008
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    194,969
    
    
    $
    35,908
    
    
    $
    (10,067
    )
    
    $
    220,810Cost of sales
    
    
    3
    
    
    
    125,640
    
    
    
    23,822
    
    
    
    (10,067
    )
    
    
    139,398Gross profit
    
    
    (3
    )
    
    
    69,329
    
    
    
    12,086
    
    
    
    
    
    
    
    81,412Selling, general and administrative expenses
    
    
    6,387
    
    
    
    36,536
    
    
    
    3,081
    
    
    
    
    
    
    
    46,004Restructuring and other infrequent expenses
    
    
    
    
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    317Amortization of intangibles
    
    
    
    
    
    
    3,352
    
    
    
    
    
    
    
    
    
    
    
    3,352(Loss) income from operations
    
    
    (6,390
    )
    
    
    29,124
    
    
    
    9,005
    
    
    
    
    
    
    
    31,739Interest expense, net
    
    
    2,212
    
    
    
    206
    
    
    
    (48
    )
    
    
    
    
    
    
    2,370Share of net income (loss) of subsidiaries
under equity method
    
    
    24,062
    
    
    
    6,396
    
    
    
    
    
    
    
    (30,458
    )
    
    
    Income (loss) before income taxes
    
    
    15,460
    
    
    
    35,314
    
    
    
    9,053
    
    
    
    (30,458
    )
    
    
    29,369Income tax expense
    
    
    
    
    
    
    11,252
    
    
    
    2,657
    
    
    
    
    
    
    
    13,909Net income (loss)
    
    $
    15,460
    
    
    $
    24,062
    
    
    $
    6,396
    
    
    $
    (30,458
    )
    
    $
    15,460
 19




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Condensed Consolidating Statement of Operations
Two Fiscal Quarters Ended July 4, 2009
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    348,146
    
    
    $
    44,699
    
    
    $
    (20,699
    )
    
    $
    372,146Cost of sales
    
    
    
    
    
    
    238,051
    
    
    
    34,213
    
    
    
    (20,699
    )
    
    
    251,565Gross profit
    
    
    
    
    
    
    110,095
    
    
    
    10,486
    
    
    
    
    
    
    
    120,581Selling, general and administrative expenses
    
    
    14,302
    
    
    
    69,778
    
    
    
    5,085
    
    
    
    
    
    
    
    89,165Amortization of intangibles
    
    
    
    
    
    
    6,703
    
    
    
    
    
    
    
    
    
    
    
    6,703(Loss) income from operations
    
    
    (14,302
    )
    
    
    33,614
    
    
    
    5,401
    
    
    
    
    
    
    
    24,713Interest expense, net
    
    
    15,663
    
    
    
    403
    
    
    
    (13
    )
    
    
    
    
    
    
    16,053Share of net income (loss) of subsidiaries
under equity method
    
    
    34,831
    
    
    
    3,731
    
    
    
    
    
    
    
    (38,562
    )
    
    
    Income (loss) before income taxes
    
    
    4,866
    
    
    
    36,942
    
    
    
    5,414
    
    
    
    (38,562
    )
    
    
    8,660Income tax expense
    
    
    
    
    
    
    2,111
    
    
    
    1,683
    
    
    
    
    
    
    
    3,794Net income (loss)
    
    $
    4,866
    
    
    $
    34,831
    
    
    $
    3,731
    
    
    $
    (38,562
    )
    
    $
    4,866
 Condensed Consolidating Statement of Operations
Two Fiscal Quarters Ended June 28, 2008
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    364,585
    
    
    $
    55,710
    
    
    $
    (17,346
    )
    
    $
    402,949Cost of sales
    
    
    16
    
    
    
    239,661
    
    
    
    38,186
    
    
    
    (17,346
    )
    
    
    260,517Gross profit
    
    
    (16
    )
    
    
    124,924
    
    
    
    17,524
    
    
    
    
    
    
    
    142,432Selling, general and administrative expenses
    
    
    11,830
    
    
    
    72,106
    
    
    
    5,703
    
    
    
    
    
    
    
    89,639Restructuring and other infrequent expenses
    
    
    
    
    
    
    492
    
    
    
    
    
    
    
    
    
    
    
    492Amortization of intangibles
    
    
    
    
    
    
    6,704
    
    
    
    
    
    
    
    
    
    
    
    6,704(Loss) income from operations
    
    
    (11,846
    )
    
    
    45,622
    
    
    
    11,821
    
    
    
    
    
    
    
    45,597Interest expense, net
    
    
    11,970
    
    
    
    372
    
    
    
    (175
    )
    
    
    
    
    
    
    12,167Share of net income (loss) of subsidiaries
under equity method
    
    
    41,671
    
    
    
    8,347
    
    
    
    
    
    
    
    (50,018
    )
    
    
    Income (loss) before income taxes
    
    
    17,855
    
    
    
    53,597
    
    
    
    11,996
    
    
    
    (50,018
    )
    
    
    33,430Income tax expense
    
    
    
    
    
    
    11,926
    
    
    
    3,649
    
    
    
    
    
    
    
    15,575Net income (loss)
    
    $
    17,855
    
    
    $
    41,671
    
    
    $
    8,347
    
    
    $
    (50,018
    )
    
    $
    17,855
 20




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Condensed Consolidating Statement of Cash Flows
Two Fiscal Quarters Ended July 4, 2009
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    4,866
    
    
    $
    34,831
    
    
    $
    3,731
    
    
    $
    (38,562
    )
    
    $
    4,866Non-cash adjustments
    
    
    5,429
    
    
    
    (32,295
    )
    
    
    7,454
    
    
    
    38,562
    
    
    
    19,150Changes in operating assets and liabilities
    
    
    10,815
    
    
    
    3,275
    
    
    
    (18,985
    )
    
    
    
    
    
    
    (4,895
    )Net cash provided by (used in) operating activities
    
    
    21,110
    
    
    
    5,811
    
    
    
    (7,800
    )
    
    
    
    
    
    
    19,121Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (4,333
    )
    
    
    (3,780
    )
    
    
    (66
    )
    
    
    
    
    
    
    (8,179
    )Net cash used in investing activities
    
    
    (4,333
    )
    
    
    (3,780
    )
    
    
    (66
    )
    
    
    
    
    
    
    (8,179
    )Cash flows from financing activities:Payments on capital lease obligations
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    (12
    )Payments on senior term notes
    
    
    (788
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (788
    )Net cash used in financing activities
    
    
    (788
    )
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    (800
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    1,010
    
    
    
    
    
    
    
    1,010Increase (decrease) in cash and cash equivalents
    
    
    15,989
    
    
    
    2,019
    
    
    
    (6,856
    )
    
    
    
    
    
    
    11,152Cash and cash equivalents, beginning of period
    
    
    14,829
    
    
    
    9,823
    
    
    
    16,649
    
    
    
    
    
    
    
    41,301Cash and cash equivalents, end of period
    
    $
    30,818
    
    
    $
    11,842
    
    
    $
    9,793
    
    
    $
    
    
    
    $
    52,453
 Condensed Consolidating Statement of Cash Flows
Two Fiscal Quarters Ended June 28, 2008
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    28,756
    
    
    $
    41,671
    
    
    $
    8,347
    
    
    $
    (60,919
    )
    
    $
    17,855Non-cash adjustments
    
    
    (9,061
    )
    
    
    (20,144
    )
    
    
    (1,645
    )
    
    
    60,919
    
    
    
    30,069Changes in operating assets and liabilities
    
    
    531
    
    
    
    (9,576
    )
    
    
    (13,988
    )
    
    
    
    
    
    
    (23,033
    )Net cash provided by (used in) operating activities
    
    
    20,226
    
    
    
    11,951
    
    
    
    (7,286
    )
    
    
    
    
    
    
    24,891Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (3,154
    )
    
    
    (3,554
    )
    
    
    (10
    )
    
    
    
    
    
    
    (6,718
    )Net cash used in investing activities
    
    
    (3,154
    )
    
    
    (3,554
    )
    
    
    (10
    )
    
    
    
    
    
    
    (6,718
    )Cash flows from financing activities:Payments on capital lease obligations
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    (11
    )Payments on senior term notes
    
    
    (1,675
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,675
    )Payments on revolving credit facility, net
    
    
    (5,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,500
    )Net cash used in financing activities
    
    
    (7,175
    )
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    (7,186
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    266
    
    
    
    
    
    
    
    266Increase (decrease) in cash and cash equivalents
    
    
    9,897
    
    
    
    8,386
    
    
    
    (7,030
    )
    
    
    
    
    
    
    11,253Cash and cash equivalents, beginning of period
    
    
    3,099
    
    
    
    1,820
    
    
    
    12,004
    
    
    
    
    
    
    
    16,923Cash and cash equivalents, end of period
    
    $
    12,996
    
    
    $
    10,206
    
    
    $
    4,974
    
    
    $
    
    
    
    $
    28,176
 21




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 FORWARD-LOOKING STATEMENTS AND INFORMATION
   OVERVIEW
 Easton Bell Giro Riddell
  How We Assess the Performance of Our Business
  Net Sales
 Giro
 22




---



##### Table of Contents



Cost of Sales
  Gross Profit
  Selling, General and Administrative Expenses
  RESULTS OF OPERATIONS
  Fiscal Quarter EndedJuly 4,
    
    
    % of
    
    
    June 28,
    
    
    % of2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales(Dollars in millions)Net sales
    
    $
    187.3
    
    
    
    100.0
    %
    
    $
    220.8
    
    
    
    100.0
    %Cost of sales
    
    
    126.9
    
    
    
    67.8
    %
    
    
    139.4
    
    
    
    63.1
    %Gross profit
    
    
    60.4
    
    
    
    32.2
    %
    
    
    81.4
    
    
    
    36.9
    %Selling, general and administrative expenses
    
    
    42.2
    
    
    
    22.5
    %
    
    
    46.0
    
    
    
    20.8
    %Restructuring expenses
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.2
    %Amortization of intangibles
    
    
    3.4
    
    
    
    1.8
    %
    
    
    3.4
    
    
    
    1.5
    %Income from operations
    
    $
    14.8
    
    
    
    7.9
    %
    
    $
    31.7
    
    
    
    14.4
    %
 Two Fiscal Quarters EndedJuly 4,
    
    
    % of
    
    
    June 28,
    
    
    % of2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales(Dollars in millions)Net sales
    
    $
    372.1
    
    
    
    100.0
    %
    
    $
    402.9
    
    
    
    100.0
    %Cost of sales
    
    
    251.5
    
    
    
    67.6
    %
    
    
    260.5
    
    
    
    64.7
    %Gross profit
    
    
    120.6
    
    
    
    32.4
    %
    
    
    142.4
    
    
    
    35.3
    %Selling, general and administrative expenses
    
    
    89.2
    
    
    
    24.0
    %
    
    
    89.6
    
    
    
    22.2
    %Restructuring expenses
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.1
    %Amortization of intangibles
    
    
    6.7
    
    
    
    1.8
    %
    
    
    6.7
    
    
    
    1.7
    %Income from operations
    
    $
    24.7
    
    
    
    6.6
    %
    
    $
    45.6
    
    
    
    11.3
    %
 23




---



##### Table of Contents



Net Sales
  Fiscal Quarter Ended
    
    
    Two Fiscal Quarters EndedJuly 4,
    
    
    June 28,
    
    
    Change
    
    
    July 4,
    
    
    June 28,
    
    
    Change2009
    
    
    2008
    
    
    $
    
    
    %
    
    
    2009
    
    
    2008
    
    
    $
    
    
    %(Dollars in millions)
    
    
    (Dollars in millions)Team Sports
    
    $
    100.8
    
    
    $
    132.3
    
    
    $
    (31.5
    )
    
    
    (23.8
    %)
    
    $
    208.6
    
    
    $
    233.1
    
    
    $
    (24.4
    )
    
    
    (10.5
    %)Action Sports
    
    
    86.5
    
    
    
    88.5
    
    
    
    (2.0
    )
    
    
    (2.3
    %)
    
    
    163.5
    
    
    
    169.8
    
    
    
    (6.4
    )
    
    
    (3.8
    %)$
    187.3
    
    
    $
    220.8
    
    
    $
    (33.5
    )
    
    
    (15.2
    %)
    
    $
    372.1
    
    
    $
    402.9
    
    
    $
    (30.8
    )
    
    
    (7.6
    %)
   Cost of Sales
  Fiscal Quarter Ended
    
    
    Two Fiscal Quarters EndedJuly 4,
    
    
    % of
    
    
    June 28,
    
    
    % of
    
    
    July 4,
    
    
    % of
    
    
    June 28,
    
    
    % of2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales
    
    
    2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales(Dollars in millions)
    
    
    (Dollars in millions)Team Sports
    
    $
    62.9
    
    
    
    62.4
    %
    
    $
    75.2
    
    
    
    56.8
    %
    
    $
    131.7
    
    
    
    63.2
    %
    
    $
    138.6
    
    
    
    59.5
    %Action Sports
    
    
    64.0
    
    
    
    74.0
    %
    
    
    64.2
    
    
    
    72.5
    %
    
    
    119.8
    
    
    
    73.3
    %
    
    
    121.9
    
    
    
    71.8
    %$
    126.9
    
    
    
    67.8
    %
    
    $
    139.4
    
    
    
    63.1
    %
    
    $
    251.5
    
    
    
    67.6
    %
    
    $
    260.5
    
    
    
    64.7
    %
   Gross Profit
  Fiscal Quarter Ended
    
    
    Two Fiscal Quarters EndedJuly 4,
    
    
    % of
    
    
    June 28,
    
    
    % of
    
    
    July 4,
    
    
    % of
    
    
    June 28,
    
    
    % of2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales
    
    
    2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales(Dollars in millions)
    
    
    
    
    
    
    
    
    
    
    (Dollars in millions)Team Sports
    
    $
    37.9
    
    
    
    37.6
    %
    
    $
    57.1
    
    
    
    43.2
    %
    
    $
    76.9
    
    
    
    36.8
    %
    
    $
    94.5
    
    
    
    40.5
    %Action Sports
    
    
    22.5
    
    
    
    26.0
    %
    
    
    24.3
    
    
    
    27.5
    %
    
    
    43.7
    
    
    
    26.7
    %
    
    
    47.9
    
    
    
    28.2
    %$
    60.4
    
    
    
    32.2
    %
    
    $
    81.4
    
    
    
    36.9
    %
    
    $
    120.6
    
    
    
    32.4
    %
    
    $
    142.4
    
    
    
    35.3
    %
 24




---



##### Table of Contents



Selling, General and Administrative Expenses
  Restructuring Expenses
  Amortization of Intangibles
  Interest Expense
  Income Tax Expense
   25




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   Senior Secured Credit Facility
     26




---



##### Table of Contents



Senior Subordinated Notes
   Other Matters
  27




---



##### Table of Contents



OUTLOOK
  
    
    Economic Climate.The uncertain worldwide economic environment could cause the reported
financial information not to be necessarily indicative of future operating results or of
future financial condition. In the future, these conditions could affect our business in a
number of direct and indirect ways, including lower revenues from slowing consumer demand
for our products, reduced profit margins and/or increased costs, changes in interest and
currency exchange rates, lack of credit availability and business disruptions due to
difficulties experienced by suppliers and customers.
    
    Retail Market Conditions.As a result of the slowing worldwide economic conditions, the
retail market for sports equipment has slowed and is extremely competitive, with strong
pressure from retailers for lower prices. However, despite these trends, we are confident
that our focus on innovation and providing the best in class products will be successful,
albeit at a slower pace, during these softer economic times.
    
    ERP Implementation.We continue to plan for our long-term growth by investing in our
operations management and infrastructure. We completed the implementation of SAPs ERP
system, an enterprise-wide software platform encompassing finance, sales and distribution,
manufacturing and materials management. This program replaced the various software platforms
used in our business operations, many of which are legacy platforms used by our predecessor
companies. We expect that this enterprise-wide software solution will enable management to
better and more efficiently conduct our operations and gather, analyze and assess
information across all business segments and geographic locations. However, we may
experience difficulties in operating our business under SAPs ERP, any of which could
disrupt our operations, including our ability to timely ship and track product orders to
customers, project inventory requirements, manage our supply chain and otherwise adequately
service our customers. We expect that the system will streamline reporting and enhance
internal controls.
 28




---



##### Table of Contents




    
    Operations and Manufacturing.A significant part of our strategic plan involves
streamlining our distribution, logistics and manufacturing operations. As a result of this,
a critical component of our long-term growth plans reflect investment in operations
management and infrastructure to bring uniform methodologies to inventory management,
optimize transportation, improve manufacturing efficiencies and provide a high level of
service to our customers. To facilitate this process we made organizational changes in 2008
and 2009 to better position us to:
 
    
    Enhance margins through development of a sourcing strategy to reduce product costs and
inventory levels
    
    Improve logistics capabilities to better service customers
    
    Leverage SAP ERP capabilities as the organization finalizes its transition to one software
platform
 We expect to lower the cost to produce and deliver our products to the marketplace through an
infrastructure designed to meet the needs of our long-term growth plans with minimal risk to
ongoing operations. However, as we have in the past and may continue in the future to
transition the production of products from our own facilities to third party suppliers, we may
become more vulnerable to increased sourced product costs and our ability to mitigate such cost
increases may be reduced.
    
    Interest Expense and Debt Repayment.In connection with our acquisition of Easton, we
entered into a senior secured credit facility providing for a $335.0 million term loan
facility, a $70.0 million U.S. revolving credit facility and a Cdn $12.0 million Canadian
revolving credit facility. As of July 4, 2009, the outstanding principal balance under our
term loan facility was $315.0 million and we had zero outstanding under both our U.S. and
Canadian revolving credit facilities. We expect our interest expense in 2009 to decrease due
to reduced debt levels, lower borrowing rates and the impact of our interest rate swap
agreement.
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Risk
   29




---



##### Table of Contents




  Interest Rate Risk
   
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  30




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 6. Exhibits
  The filings referenced forExhibit
    
    
    
    incorporation by referenceNumber
    
    Description of Exhibit
    
    are:31.1
    
    Certification of the Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Filed herewith31.2
    
    Certification of the Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Filed herewith32.1
    
    Certification of the Principal Executive Officer and Principal Financial
Officer pursuant to the 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
    
    Filed herewith
 31




---



##### Table of Contents



SIGNATURES
  EASTON-BELL SPORTS, INC.
RegistrantDated: August 18, 2009
    /s/ Paul E. HarringtonPaul E. HarringtonChief Executive Officer and President
(Principal Executive Officer) Dated: August 18, 2009
    /s/ Mark A. TrippMark A. TrippChief Financial Officer
(Principal Financial Officer) 32