##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 o
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 Commission file number: 333-123927
 EASTON-BELL SPORTS, INC.
 (Exact name of registrant as specified in its certificate of incorporation)
 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)
 800-347-3901  (Registrants telephone number, including area code)
 
 o þ
  o o þ
 o þ




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##### 



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATION:Item 1. Financial StatementsConsolidated Balance Sheets as of March 31, 2007 (unaudited) and December 30, 2006
    
    
    3Consolidated Statements of Operations and Comprehensive Income (Loss) for the Fiscal Quarter Ended
March 31, 2007 (unaudited) and April 1, 2006 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Fiscal Quarter Ended March 31, 2007 (unaudited) and
April 1, 2006 (unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26PART II. OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 6. Exhibits
    
    
    27SIGNATURES
    
    
    28Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO and CFO Pursuant to Section 906
  2




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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)
 March 31,
    
    
    December 30,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,580
    
    
    $
    9,899Accounts receivable, net
    
    
    197,272
    
    
    
    182,234Inventories, net
    
    
    140,235
    
    
    
    134,847Prepaid expenses
    
    
    9,187
    
    
    
    10,449Deferred taxes
    
    
    10,224
    
    
    
    10,224Other current assets
    
    
    1,291
    
    
    
    1,611Total current assets
    
    
    364,789
    
    
    
    349,264Property, plant and equipment, net
    
    
    36,082
    
    
    
    34,198Deferred financing fees, net
    
    
    18,166
    
    
    
    19,271Intangible assets, net
    
    
    327,280
    
    
    
    330,445Goodwill
    
    
    205,149
    
    
    
    207,327Other assets
    
    
    7,934
    
    
    
    7,555Total assets
    
    $
    959,400
    
    
    $
    948,060LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    3,350
    
    
    $
    3,350Revolving credit facility
    
    
    26,800
    
    
    
    3,500Current portion of capital lease obligations
    
    
    38
    
    
    
    36Accounts payable
    
    
    50,972
    
    
    
    56,950Accrued expenses
    
    
    53,347
    
    
    
    60,405Total current liabilities
    
    
    134,507
    
    
    
    124,241Long-term debt, less current portion
    
    
    468,300
    
    
    
    469,138Capital lease obligations, less current portion
    
    
    163
    
    
    
    174Deferred taxes
    
    
    23,715
    
    
    
    23,681Other non-current liabilities
    
    
    12,347
    
    
    
    12,664Total liabilities
    
    
    639,032
    
    
    
    629,898Stockholders Equity:Common stock; $0.01 par value, 100 shares authorized, 100 shares issued
andoutstanding at March 31, 2007 and December 30, 2006
    
    
    
    
    
    
    Additional paid-in capital
    
    
    335,127
    
    
    
    334,432Accumulated deficit
    
    
    (15,230
    )
    
    
    (16,509
    )Accumulated other comprehensive income
    
    
    471
    
    
    
    239Total stockholders equity
    
    
    320,368
    
    
    
    318,162Total liabilities and stockholders equity
    
    $
    959,400
    
    
    $
    948,060
  3




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
 (Unaudited and amounts in thousands)
 Fiscal Quarter EndedMarch 31,
    
    
    April 1,2007
    
    
    2006Net sales
    
    $
    174,634
    
    
    $
    111,172Cost of sales
    
    
    116,121
    
    
    
    74,307Gross profit
    
    
    58,513
    
    
    
    36,865Selling, general and administrative expenses
    
    
    42,226
    
    
    
    27,241Management expenses
    
    
    
    
    
    
    8,250Restructuring and other infrequent expenses
    
    
    49
    
    
    
    275Amortization of intangibles
    
    
    3,165
    
    
    
    2,341Income (loss) from operations
    
    
    13,073
    
    
    
    (1,242
    )Interest expense, net
    
    
    10,906
    
    
    
    11,481Other expense
    
    
    
    
    
    
    56Income (loss) before income taxes
    
    
    2,167
    
    
    
    (12,779
    )Income tax expense (benefit)
    
    
    888
    
    
    
    (5,035
    )Net income (loss)
    
    
    1,279
    
    
    
    (7,744
    )Other comprehensive income:Foreign currency translation adjustment
    
    
    232
    
    
    
    (185
    )Comprehensive income (loss)
    
    $
    1,511
    
    
    $
    (7,929
    )
  4




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Fiscal Quarter EndedMarch 31,
    
    
    April 1,2007
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    1,279
    
    
    $
    (7,744
    )Adjustments to reconcile net income (loss) to net cash used in operating activities:Depreciation and amortization
    
    
    5,609
    
    
    
    4,637Amortization of deferred financing fees
    
    
    1,105
    
    
    
    593Deferred financing fees of old debt written off
    
    
    
    
    
    
    1,613Stock compensation expense
    
    
    695
    
    
    
    49Deferred income tax expense (benefit)
    
    
    34
    
    
    
    (6,422
    )Gain on sale of property, plant and equipment
    
    
    (7
    )
    
    
    Changes in operating assets and liabilities, net of effects from purchase of business:Accounts receivable, net
    
    
    (14,724
    )
    
    
    (10,341
    )Inventories, net
    
    
    (5,328
    )
    
    
    (11,281
    )Other current and noncurrent assets
    
    
    1,229
    
    
    
    556Accounts payable
    
    
    (5,978
    )
    
    
    7,890Accrued expenses
    
    
    (7,058
    )
    
    
    (5,671
    )Other current and noncurrent liabilities
    
    
    (317
    )
    
    
    (312
    )Net cash used in operating activities
    
    
    (23,461
    )
    
    
    (26,433
    )Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (4,221
    )
    
    
    (3,720
    )Settlement of preacquisition contingency
    
    
    2,178
    
    
    
    Purchase of business, net of cash acquired
    
    
    (500
    )
    
    
    (389,657
    )Net cash used in investing activities
    
    
    (2,543
    )
    
    
    (393,377
    )Cash flows from financing activities:Proceeds from issuance of senior term notes
    
    
    
    
    
    
    335,000Payments on old senior term notes
    
    
    
    
    
    
    (108,625
    )Payments on new senior term notes
    
    
    (838
    )
    
    
    Proceeds from revolving credit facility
    
    
    48,600
    
    
    
    65,404Payments on revolving credit facility
    
    
    (25,300
    )
    
    
    (35,702
    )Payments on capital lease obligations
    
    
    (9
    )
    
    
    (17
    )Capital contribution
    
    
    
    
    
    
    186,423Payment of debt issuance costs
    
    
    
    
    
    
    (11,902
    )Net cash provided by financing activities
    
    
    22,453
    
    
    
    430,581Effect of exchange rate changes on cash and cash equivalents
    
    
    232
    
    
    
    (185
    )(Decrease) increase in cash and cash equivalents
    
    
    (3,319
    )
    
    
    10,586Cash and cash equivalents, beginning of period
    
    
    9,899
    
    
    
    3,632Cash and cash equivalents, end of period
    
    $
    6,580
    
    
    $
    14,218
  5




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 ( )
 1. Basis of Presentation
 References to the Company
refer to Easton-Bell Sports, Inc. and its consolidated
subsidiaries. References to Easton, Bell and Riddell refer to Easton Sports, Inc. and its
consolidated subsidiaries, Bell Sports Corp. and its consolidated subsidiaries, and Riddell Sports
Group and its consolidated subsidiaries, respectively, in each case, prior to its acquisition by
Easton-Bell Sports, Inc. Easton-Bell Sports, Inc. is a subsidiary of RBG Holdings Corp. (RBG), which is a subsidiary of EB
Sports Corp., which is a subsidiary of Easton-Bell Sports, LLC, the ultimate parent company (the
Parent).
   2.
Acquisition Activity
 Easton
Sports, Inc.
       6




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
  Business Combinations
    Net purchase price including cost of the transaction
    
    $
    405,466Add:Liabilities assumed (mainly accounts payable and accrued expenses)
    
    
    40,799Less amounts allocated to specific asset categories:Accounts receivable
    
    
    (81,123
    )Inventory
    
    
    (83,888
    )Other current assets
    
    
    (3,434
    )Property, plant and equipment
    
    
    (11,273
    )Other assets
    
    
    (2,874
    )Patents
    
    
    (22,000
    )Licensing agreements
    
    
    (4,300
    )Trademarks
and tradenames (indefinite-lived)
    
    
    (128,300
    )Non-compete agreement
    
    
    (1,600
    )Customer relationships
    
    
    (9,900
    )Net deferred tax liabilities relating to differences in the
financial statement and the tax basis
of certain assets and liabilities
    
    
    4,147Excess of cost over net assets acquired (goodwill)
    
    $
    101,720
   Pro formaFiscal Quarter
    
    Fiscal QuarterEnded
    
    EndedMarch 31,
    
    April 1,2007
    
    2006Net sales
    
    $
    174,634
    
    
    $
    166,546Net income
    
    
    1,279
    
    
    
    3,848
 Other
Acquisitions
 Business
Combinations
 Business Combinations.
 7




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
 3. Restructuring
  Recognition of Liabilities in
Connection with a Purchase Business Combination
 FacilityEmployee
    
    
    ClosureSeverance
    
    
    Costs
    
    
    TotalBalance as of December 30, 2006
    
    $
    1,890
    
    
    $
    2,238
    
    
    $
    4,128Less: amounts paid during the quarter
    
    
    (686
    )
    
    
    (52
    )
    
    
    (738
    )Balance as of March 31, 2007
    
    $
    1,204
    
    
    $
    2,186
    
    
    $
    3,390
   8




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
 4. Goodwill and Other Intangible Assets
  March 31, 2007
    
    
    December 30, 2006Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmounts
    
    
    Amortization
    
    
    Amounts
    
    
    AmortizationAmortizable intangible assets:Trademarks and tradenames
    
    $
    1,702
    
    
    $
    (902
    )
    
    $
    1,702
    
    
    $
    (840
    )Customer relationships
    
    
    59,180
    
    
    
    (15,960
    )
    
    
    59,180
    
    
    
    (14,787
    )Patents
    
    
    60,345
    
    
    
    (12,056
    )
    
    
    60,345
    
    
    
    (10,441
    )Licensing and other
    
    
    5,900
    
    
    
    (1,313
    )
    
    
    5,900
    
    
    
    (998
    )Total
    
    $
    127,127
    
    
    $
    (30,231
    )
    
    $
    127,127
    
    
    $
    (27,066
    )Indefinite-lived intangible assets:Trademarks
and tradenames
    
    $
    230,384
    
    
    
    
    
    
    $
    230,384
  Team
    
    
    ActionSports
    
    
    Sports
    
    
    ConsolidatedBalance as of March 31, 2007
    
    $
    144,719
    
    
    $
    60,430
    
    
    $
    205,149
 Goodwill and Other Intangible Assets
 5. Long-Term Debt
  March 31, 2007
    
    
    December 30, 2006Senior Secured Credit Facility:Term loan facility
    
    $
    331,650
    
    
    $
    332,488U. S. revolving credit facility
    
    
    26,800
    
    
    
    3,5008.375% Senior subordinated notes due 2012
    
    
    140,000
    
    
    
    140,000Capital lease obligations
    
    
    201
    
    
    
    210Total long-term debt
    
    
    498,651
    
    
    
    476,198Less current maturities of long-term debt and revolving credit facility
    
    
    (30,188
    )
    
    
    (6,886
    )Long-term debt, less current portion
    
    $
    468,463
    
    
    $
    469,312
 Senior
Credit Agreement
   9




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
     Senior
Subordinated Notes
    Other
  10




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
 Debtors Accounting for a Modification or Exchange of Debt Instruments
 6. Accrued Expenses
  March 31, 2007
    
    
    December 30, 2006Salaries, wages, commissions and bonuses
    
    $
    15,657
    
    
    $
    13,902Advertising
    
    
    4,718
    
    
    
    6,009Restructuring
    
    
    3,390
    
    
    
    4,128Defective products
    
    
    1,136
    
    
    
    1,990Rebates
    
    
    2,971
    
    
    
    2,634Warranty
    
    
    2,563
    
    
    
    2,981Product liability  current portion
    
    
    2,640
    
    
    
    2,162Royalties
    
    
    1,436
    
    
    
    2,458Interest
    
    
    1,016
    
    
    
    3,604Other
    
    
    17,820
    
    
    
    20,537Total accrued expenses
    
    $
    53,347
    
    
    $
    60,405
 7. Inventories
   March 31, 2007
    
    
    December 30, 2006Raw materials
    
    $
    19,574
    
    
    $
    18,220Work-in-process
    
    
    2,681
    
    
    
    3,550Finished goods
    
    
    117,980
    
    
    
    113,077Inventories, net
    
    $
    140,235
    
    
    $
    134,847
 8. Recent Accounting Pronouncements
 Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB
Statement No. 109, Accounting for Income Taxes
 Fair Value Measurements.
 11




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
 9. Segment Reporting
   Team
    
    ActionFiscal Quarter Ended
    
    Sports
    
    Sports
    
    ConsolidatedMarch 31, 2007Net sales
    
    $
    97,761
    
    
    $
    76,873
    
    
    $
    174,634Income from operations
    
    
    12,843
    
    
    
    6,249
    
    
    
    19,092Depreciation
    
    
    1,164
    
    
    
    1,280
    
    
    
    2,444Capital expenditures
    
    
    1,296
    
    
    
    2,925
    
    
    
    4,221April 1, 2006Net sales
    
    $
    46,241
    
    
    $
    64,931
    
    
    $
    111,172Income from operations
    
    
    4,238
    
    
    
    7,053
    
    
    
    11,291Depreciation
    
    
    1,336
    
    
    
    960
    
    
    
    2,296Capital expenditures
    
    
    451
    
    
    
    3,269
    
    
    
    3,720
 Team
    
    ActionSports
    
    Sports
    
    ConsolidatedAssetsAs of March 31, 2007
    
    $
    587,817
    
    
    $
    371,583
    
    
    $
    959,400As of December 30, 2006
    
    
    587,267
    
    
    
    360,793
    
    
    
    948,060
  Fiscal Quarter EndedMarch 31, 2007
    
    
    April 1, 2006Segment income from operations
    
    $
    19,092
    
    
    $
    11,291Stock compensation expense
    
    
    (695
    )
    
    
    (49
    )Management expenses
    
    
    
    
    
    
    (8,250
    )Corporate expenses
    
    
    (2,110
    )
    
    
    (1,618
    )Restructuring and other infrequent expenses
    
    
    (49
    )
    
    
    (275
    )Amortization of intangibles
    
    
    (3,165
    )
    
    
    (2,341
    )Consolidated income (loss) from operations
    
    $
    13,073
    
    
    $
    (1,242
    )
 10. Product Liability, Litigation and Other Contingencies
 Product Liability
  12




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
  Litigation and Other Contingencies
  11. Income Taxes
 Accounting for Uncertainty in Income Taxesan
interpretation of FASB Statement No. 109, Accounting for Income Taxes
      13




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
  12. Derivative Instruments and Hedging Activity
 Accounting for Derivative Instruments and Hedging Activities
   13. Stock-Based Employee Compensation
  Share Based Payment Accounting for Stock Based Compensation
 Shared Based Payment
  14




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
  Fiscal Quarter
    
    Fiscal QuarterEnded
    
    EndedMarch 31, 2007
    
    April 1, 2006Unit based compensation expense
    
    
    $695
    
    
    
    $49
   Weighted AverageNumber of
    
    
    Grant DateUnits
    
    
    Fair ValueOutstanding at December 30, 2006
    
    
    30,887,736
    
    
    $
    2.11Forfeited
    
    
    (3,198,526
    )
    
    $
    2.14Outstanding at March 31, 2007
    
    
    27,689,210
    
    
    $
    2.11Vested Units at March 31, 2007
    
    
    2,571,213
    
    
    $
    1.93
 14. Warranty Obligations
   Fiscal Quarter EndedMarch 31,
    
    
    April 1,2007
    
    
    2006Beginning of period
    
    $
    2,981
    
    
    $
    2,764Warranty costs incurred during the period
    
    
    (1,501
    )
    
    
    (417
    )Warranty cost liability recorded during the period
    
    
    1,083
    
    
    
    481End of period
    
    $
    2,563
    
    
    $
    2,828
 15. Related Party Transactions
  15




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
 Easton Easton
    16. Supplemental Guarantor Condensed Financial Information
   16




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
 Easton-Bell Sports, Inc.
 Consolidating Balance Sheet
March 31, 2007
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    656
    
    
    $
    2,028
    
    
    $
    3,896
    
    
    $
    
    
    
    $
    6,580Accounts receivable, net
    
    
    
    
    
    
    174,564
    
    
    
    22,708
    
    
    
    
    
    
    
    197,272Inventories, net
    
    
    
    
    
    
    126,784
    
    
    
    13,451
    
    
    
    
    
    
    
    140,235Prepaid expenses
    
    
    2,028
    
    
    
    6,957
    
    
    
    202
    
    
    
    
    
    
    
    9,187Deferred taxes
    
    
    5,206
    
    
    
    5,018
    
    
    
    
    
    
    
    
    
    
    
    10,224Other current assets
    
    
    
    
    
    
    1,148
    
    
    
    143
    
    
    
    
    
    
    
    1,291Total current assets
    
    
    7,890
    
    
    
    316,499
    
    
    
    40,400
    
    
    
    
    
    
    
    364,789Property, plant and equipment, net
    
    
    6,736
    
    
    
    28,056
    
    
    
    1,290
    
    
    
    
    
    
    
    36,082Deferred financing fees, net
    
    
    18,166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,166Investments and intercompany receivables
    
    
    769,087
    
    
    
    
    
    
    
    12,409
    
    
    
    (781,496
    )
    
    
    Intangible assets, net
    
    
    
    
    
    
    320,940
    
    
    
    6,340
    
    
    
    
    
    
    
    327,280Goodwill
    
    
    16,195
    
    
    
    183,763
    
    
    
    5,191
    
    
    
    
    
    
    
    205,149Other assets
    
    
    
    
    
    
    7,934
    
    
    
    
    
    
    
    
    
    
    
    7,934Total assets
    
    $
    818,074
    
    
    $
    857,192
    
    
    $
    65,630
    
    
    $
    (781,496
    )
    
    $
    959,400Liabilities & Stockholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    3,350
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,350Revolving credit facility
    
    
    26,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,800Current portion of capital lease obligations
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    38Accounts payable
    
    
    
    
    
    
    48,389
    
    
    
    2,583
    
    
    
    
    
    
    
    50,972Accrued expenses
    
    
    
    
    
    
    45,413
    
    
    
    7,934
    
    
    
    
    
    
    
    53,347Total current liabilities
    
    
    
    
    
    
    30,150
    
    
    
    93,840
    
    
    
    10,517
    
    
    
    134,507Long-term debt, less current portion
    
    
    468,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    468,300Capital lease obligations, less current portion
    
    
    
    
    
    
    163
    
    
    
    
    
    
    
    
    
    
    
    163Deferred taxes
    
    
    
    
    
    
    19,913
    
    
    
    3,802
    
    
    
    
    
    
    
    23,715Other
non-current liabilities
    
    
    
    
    
    
    7,045
    
    
    
    5,302
    
    
    
    
    
    
    
    12,347Long-term intercompany payables
    
    
    
    
    
    
    640,858
    
    
    
    
    
    
    
    (640,858
    )
    
    
    Total liabilities
    
    
    498,450
    
    
    
    761,819
    
    
    
    19,621
    
    
    
    (640,858
    )
    
    
    639,032Total stockholders equity
    
    
    319,624
    
    
    
    95,373
    
    
    
    46,009
    
    
    
    (140,638
    )
    
    
    320,368Total liabilities & stockholders equity
    
    $
    818,074
    
    
    $
    857,192
    
    
    $
    65,630
    
    
    $
    (781,496
    )
    
    $
    959,400
 17




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
 Easton-Bell Sports, Inc.
 Consolidating Statement of Operations
Fiscal Quarter Ended March 31, 2007
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    168,539
    
    
    $
    18,949
    
    
    $
    (12,854
    )
    
    $
    174,634Cost of sales
    
    
    42
    
    
    
    114,543
    
    
    
    14,390
    
    
    
    (12,854
    )
    
    
    116,121Gross profit
    
    
    (42
    )
    
    
    53,996
    
    
    
    4,559
    
    
    
    
    
    
    
    58,513Selling, general and administrative expenses
    
    
    3,772
    
    
    
    35,868
    
    
    
    2,586
    
    
    
    
    
    
    
    42,226Restructuring and other infrequent expenses
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    49Amortization of intangibles
    
    
    
    
    
    
    3,005
    
    
    
    160
    
    
    
    
    
    
    
    3,165Income (loss) from operations
    
    
    (3,814
    )
    
    
    15,074
    
    
    
    1,813
    
    
    
    
    
    
    
    13,073Interest expense, net
    
    
    10,747
    
    
    
    241
    
    
    
    (82
    )
    
    
    
    
    
    
    10,906Share of net income of subsidiaries under equity method
    
    
    15,306
    
    
    
    1,180
    
    
    
    
    
    
    
    (16,486
    )
    
    
    Income (loss) before income taxes
    
    
    745
    
    
    
    16,013
    
    
    
    1,895
    
    
    
    (16,486
    )
    
    
    2,167Income tax expense
    
    
    
    
    
    
    173
    
    
    
    715
    
    
    
    
    
    
    
    888Net income (loss)
    
    $
    745
    
    
    $
    15,840
    
    
    $
    1,180
    
    
    $
    (16,486
    )
    
    $
    1,279
 18




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
( )
 Easton-Bell Sports, Inc. and Subsidiaries
 Condensed Consolidating Statement of Cash Flows
March 31, 2007
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    745
    
    
    $
    15,559
    
    
    $
    1,181
    
    
    $
    (16,206
    )
    
    $
    1,279Non-cash adjustments
    
    
    (17,792
    )
    
    
    7,887
    
    
    
    1,135
    
    
    
    16,206
    
    
    
    7,436Changes in operating assets and liabilities, net of effects
from purchase of business
    
    
    (4,347
    )
    
    
    (23,623
    )
    
    
    (4,206
    )
    
    
    
    
    
    
    (32,176
    )Net cash used in operating activities
    
    
    (21,394
    )
    
    
    (177
    )
    
    
    (1,890
    )
    
    
    
    
    
    
    (23,461
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (1,939
    )
    
    
    (2,149
    )
    
    
    (133
    )
    
    
    
    
    
    
    (4,221
    )Settlement of preacquisition contingency
    
    
    
    
    
    
    
    
    
    
    2,178
    
    
    
    
    
    
    
    2,178Purchase of business, net of cash acquired
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    (500
    )Net cash (used in) provided by investing activities
    
    
    (1,939
    )
    
    
    (2,649
    )
    
    
    2,045
    
    
    
    
    
    
    
    (2,543
    )Cash flows from financing activities:Payments on capital lease obligations
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (9
    )Proceeds from senior secured credit facility, net
    
    
    22,462
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,462Net cash provided by (used in) financing activities
    
    
    22,462
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    22,453Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    232
    
    
    
    
    
    
    
    232(Decrease)
increase in cash and cash equivalents
    
    
    (871
    )
    
    
    (2,835
    )
    
    
    387
    
    
    
    
    
    
    
    (3,319
    )Cash and cash equivalents, beginning of year
    
    
    1,527
    
    
    
    2,685
    
    
    
    5,687
    
    
    
    
    
    
    
    9,899Cash and cash equivalents, end of year
    
    $
    656
    
    
    $
    (150
    )
    
    $
    6,074
    
    
    $
    
    
    
    $
    6,580
 19




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##### 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
  Gross Profit
  20




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##### Table of Contents



Selling, General and Administrative Expenses
  RESULTS OF OPERATIONS
 Net Sales
  Fiscal Quarter Ended
    
    
    
    
    
    
    
    
    
    Change Due toMarch 31,
    
    April 1,
    
    Change
    
    Easton Acquisition2007
    
    2006
    
    $
    
    %
    
    $
    
    %(Dollars in thousands)Net sales for the quarter ended
    
    $
    174,634
    
    
    $
    111,172
    
    
    $
    63,462
    
    
    
    57.1
    %
    
    $
    55,728
    
    
    
    50.1
    %
  Fiscal Quarter Ended
    
    
    Change dueMarch 31,
    
    
    % of
    
    
    April 1,
    
    
    % of
    
    
    to2007
    
    
    Net Sales
    
    
    2006
    
    
    Net Sales
    
    
    acquisition(Dollars in thousands)Gross profit
    
    $
    58,513
    
    
    
    33.5
    %
    
    $
    36,865
    
    
    
    33.2
    %
    
    $
    17,902Selling, general and administrative expenses
    
    
    42,226
    
    
    
    24.2
    %
    
    
    27,241
    
    
    
    24.5
    %
    
    
    8,512Management expenses
    
    
    
    
    
    
    0.0
    %
    
    
    8,250
    
    
    
    7.4
    %
    
    
    Restructuring and other infrequent expenses
    
    
    49
    
    
    
    0.0
    %
    
    
    275
    
    
    
    0.3
    %
    
    
    Amortization of intangibles
    
    
    3,165
    
    
    
    1.8
    %
    
    
    2,341
    
    
    
    2.1
    %
    
    
    830Income (loss) from operations
    
    $
    13,073
    
    
    
    7.5
    %
    
    $
    (1,242
    )
    
    
    (1.1
    )%
    
    $
    8,560
 Gross Profit
  21




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##### Table of Contents



Selling, General and Administrative Expenses
  Management Expenses
  Restructuring Expenses
  Amortization of Intangibles
  Interest Expense
  Income Tax Expense (Benefit)
  RESTRUCTURING
  22




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##### Table of Contents



Recognition of Liabilities in
Connection with a Purchase Business Combination
 FacilityEmployee
    
    
    ClosureSeverance
    
    
    Costs
    
    
    Total(Dollars in thousands)Balance as of December 30, 2006
    
    $
    1,890
    
    
    $
    2,238
    
    
    $
    4,128Less: amounts paid during the quarter
    
    
    (686
    )
    
    
    (52
    )
    
    
    (738
    )Balance as of March 31, 2007
    
    $
    1,204
    
    
    $
    2,186
    
    
    $
    3,390
   LIQUIDITY AND CAPITAL RESOURCES
   Senior
Secured Credit Facility
    23




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##### Table of Contents



Senior Subordinated Notes
   Other Matters
         24




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##### Table of Contents



OUTLOOK
  Combination with Easton Sports.
 Amortization of Intangibles. Business
Combinations
 Net Sales and Income from Operations.
 Seasonality.
 Integration Progress and Synergies.
 Introduction of New Products. Giro Easton Bell Giro
 ERP Implementation.
 25




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##### Table of Contents



Interest Expense and Debt Repayment.
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  
 Item 3: Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Risk
    Interest Rate Risk
   
 Item 4: Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  26




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 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 Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
    
    Filed herewith31.2
    
    Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
    
    Filed herewith32.1
    
    Certification of the Chief Executive Officer and Chief 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
 27




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##### Table of Contents



SIGNATURES
  EASTON-BELL SPORTS, INC.
RegistrantDated: May 14, 2007
    /s/ Anthony M. PalmaAnthony M. PalmaChief Executive OfficerDated: May 14, 2007
    /s/ Mark TrippMark TrippChief Financial Officer
(Principal Financial Officer) 28