##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED July 2, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER 333-123927
 RIDDELL BELL HOLDINGS, INC.
  DELAWARE
    
    20-1636283(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)
 6225 North State Hwy 161, Suite 300
Irving, Texas 75038
 REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE (469) 417-6700
 þ o
 o þ




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RIDDELL BELL HOLDINGS, INC. AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATION:Item 1. Financial StatementsCondensed Consolidated Balance Sheets as of
July 2, 2005 and December 31, 2004
    
    
    1Condensed Consolidated Statements of Operations for the
Fiscal Quarters Ended July 2, 2005 and June 30, 2004
    
    
    2Condensed Consolidated Statements of Operations for the
Two Fiscal Quarters Ended July 2, 2005 and June 30, 2004
    
    
    3Condensed Consolidated Statements of Cash Flows for the
Two Fiscal Quarters Ended July 2, 2005 and June 30, 2004
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosure about Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II. OTHER INFORMATION:Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    22




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
  
 
 July 2,
    
    December 31,2005
    
    2004(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    702
    
    
    $
    1,429Accounts receivable, net
    
    
    103,797
    
    
    
    66,373Inventories, net
    
    
    60,070
    
    
    
    49,643Current deferred taxes
    
    
    12,022
    
    
    
    14,210Other current assets
    
    
    9,109
    
    
    
    10,947Total current assets
    
    
    185,700
    
    
    
    142,602Property, plant and equipment, net
    
    
    20,045
    
    
    
    20,469Intangible assets, net
    
    
    180,839
    
    
    
    185,059Goodwill
    
    
    101,544
    
    
    
    101,544Other assets
    
    
    21,351
    
    
    
    20,902Total assets
    
    $
    509,479
    
    
    $
    470,576LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    1,173
    
    
    $
    1,184Accounts payable
    
    
    21,869
    
    
    
    19,693Accrued expenses
    
    
    35,686
    
    
    
    33,066Revolving Credit Facility
    
    
    30,000
    
    
    
    Total current liabilities
    
    
    88,728
    
    
    
    53,943Long-term debt, less current portion
    
    
    248,318
    
    
    
    248,914Deferred taxes and other noncurrent liabilities
    
    
    41,444
    
    
    
    42,247Total liabilities
    
    
    378,490
    
    
    
    345,104Stockholders Equity:Common stock; $.01 par value, 100 shares
authorized, 100 shares issued and outstanding
at July 2, 2005 and December 31, 2004,
respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    141,000
    
    
    
    139,004Accumulated deficit
    
    
    (10,095
    )
    
    
    (13,739
    )Accumulated other comprehensive income
    
    
    84
    
    
    
    207Total stockholders equity
    
    
    130,989
    
    
    
    125,472Total liabilities and stockholders equity
    
    $
    509,479
    
    
    $
    470,576
  1




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Fiscal
Quarter EndedJuly 2,
    
    June 30,2005
    
    2004Net sales
    
    $
    103,781
    
    
    $
    33,698Cost of sales
    
    
    64,747
    
    
    
    18,684Gross profit
    
    
    39,034
    
    
    
    15,014Selling, general and administrative expenses
    
    
    24,603
    
    
    
    9,725Amortization of intangibles
    
    
    2,106
    
    
    
    1,089Income from operations
    
    
    12,325
    
    
    
    4,200Interest expense, net
    
    
    5,592
    
    
    
    2,122Income before income taxes
    
    
    6,733
    
    
    
    2,078Income tax provision
    
    
    3,258
    
    
    
    832Net income
    
    
    3,475
    
    
    
    1,246Other comprehensive incomeForeign currency translation
    
    
    31
    
    
    
    Comprehensive income
    
    $
    3,506
    
    
    $
    1,246
  2




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Two
Fiscal Quarters EndedJuly 2,
    
    June 30,2005
    
    2004Net sales
    
    $
    191,014
    
    
    $
    61,912Cost of sales
    
    
    120,718
    
    
    
    34,998Gross profit
    
    
    70,296
    
    
    
    26,914Selling, general and administrative expenses
    
    
    48,418
    
    
    
    18,599Amortization of intangibles
    
    
    4,220
    
    
    
    1,746Income from operations
    
    
    17,658
    
    
    
    6,569Interest expense, net
    
    
    10,682
    
    
    
    3,977Income before income taxes
    
    
    6,976
    
    
    
    2,592Income tax provision
    
    
    3,332
    
    
    
    1,038Net income
    
    
    3,644
    
    
    
    1,554Other comprehensive (loss)Foreign currency translation
    
    
    (123
    )
    
    
    Comprehensive income
    
    $
    3,521
    
    
    $
    1,554
  3




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Two
Fiscal Quarters EndedJuly 2,
    
    June 30,2005
    
    2004Cash flows from operating activities:Net income
    
    $
    3,644
    
    
    $
    1,554Adjustments to reconcile net income to net cash used in
operating activities:Depreciation and amortization
    
    
    6,774
    
    
    
    2,800Deferred debt issuance costs amortization
    
    
    946
    
    
    
    662Accrual of PIK interest expense
    
    
    
    
    
    
    306Variable stock compensation expense
    
    
    1,391
    
    
    
    231Deferred tax provision
    
    
    1,492
    
    
    
    741Write-down of property, plant and equipment
    
    
    127
    
    
    
    Changes in operating assets and liabilities, net of
effects from purchase of businesses:Accounts receivable, net
    
    
    (37,424
    )
    
    
    (19,505
    )Inventories
    
    
    (10,427
    )
    
    
    (1,297
    )Other current assets and noncurrent assets
    
    
    716
    
    
    
    (2,583
    )Accounts payable
    
    
    2,176
    
    
    
    (86
    )Accrued expenses
    
    
    2,620
    
    
    
    3,675Other current liabilities and noncurrent liabilities
    
    
    (108
    )
    
    
    Net cash used in operating activities
    
    
    (28,073
    )
    
    
    (13,502
    )Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (2,257
    )
    
    
    (317
    )Purchase of businesses, net of cash acquired
    
    
    
    
    
    
    (1,252
    )Net cash used in investing activities
    
    
    (2,257
    )
    
    
    (1,569
    )Cash flows from financing activities:Payments on senior term loan
    
    
    (550
    )
    
    
    (1,875
    )Payments on capital lease obligations
    
    
    (57
    )
    
    
    (119
    )Proceeds from revolving credit facility
    
    
    112,314
    
    
    
    24,807Payments on revolving credit facility
    
    
    (82,314
    )
    
    
    (10,027
    )Deferred debt issuance costs
    
    
    (272
    )
    
    
    Capital contribution (distribution)
    
    
    605
    
    
    
    (160
    )Net cash provided by financing activities
    
    
    29,726
    
    
    
    12,626Effect of exchange rates on cash and cash equivalents
    
    
    (123
    )
    
    
    Decrease in cash and cash equivalents
    
    
    (727
    )
    
    
    (2,445
    )Cash and cash equivalents at beginning of period
    
    
    1,429
    
    
    
    3,672Cash and cash equivalents at end of period
    
    $
    702
    
    
    $
    1,227
  4




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RIDDELL BELL HOLDINGS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
( )
 1. BASIS OF PRESENTATION
   2. ACQUISITIONS
     5




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Net purchase price including cost of the transaction
    
    $
    242,925Add:Liabilities assumed (mainly accounts payable and
accrued expenses)
    
    
    49,684Less:Current assets
    
    
    (101,080
    )Property, plant and equipment
    
    
    (13,906
    )Other assets
    
    
    (182
    )Trademarks
    
    
    (62,419
    )Patents
    
    
    (32,496
    )Customer relationships
    
    
    (31,700
    )Deferred tax assets relating to estimated value of
tax net operating loss
    
    
    (49,178
    )Net deferred tax liabilities relating to differences
in the financial statements and the tax basis of
certain assets and liabilities
    
    
    55,837Excess of cost over net assets acquired (goodwill)
    
    $
    57,485
  Fiscal
    
    TwoQuarter
    
    QuartersEnded
    
    EndedJune 30,
    
    June 30,2004
    
    2004Net sales
    
    $
    89,678
    
    
    $
    174,287Net income
    
    
    5,384
    
    
    
    6,675
 3. RESTRUCTURING AND OTHER INFREQUENT EXPENSES
  6




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Write-down of
    
    
    
    
    
    Employee
    
    FacilityProperty, Plant and
    
    Employee
    
    Retention
    
    ClosureEquipment
    
    Severance
    
    Payments
    
    Costs
    
    TotalFirst fiscal quarter of 2005:Provision
    
    $
    
    
    
    $
    567
    
    
    $
    
    
    
    $
    181
    
    
    $
    748Cash activity
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    (181
    )
    
    
    (230
    )Balances as of April 2, 2005
    
    
    
    
    
    
    518
    
    
    
    
    
    
    
    
    
    
    
    518Second
fiscal quarter of 2005:Provision (reversal)
    
    
    127
    
    
    
    (25
    )
    
    
    32
    
    
    
    325
    
    
    
    459Less:Non-cash activity
    
    
    (127
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (127
    )Cash activity
    
    
    
    
    
    
    (291
    )
    
    
    (26
    )
    
    
    (325
    )
    
    
    (642
    )Balances as of July 2, 2005
    
    $
    
    
    
    $
    202
    
    
    $
    6
    
    
    $
    
    
    
    $
    208
  4. GOODWILL AND OTHER INTANGIBLE ASSETS
  July 2, 2005
    
    December 31, 2004GrossCarrying
    
    Accumulated
    
    Gross Carrying
    
    AccumulatedAmounts
    
    Amortization
    
    Amounts
    
    AmortizationAmortized intangible assets:Trademarks and tradenames
    
    $
    1,702
    
    
    $
    (467
    )
    
    $
    1,702
    
    
    $
    (347
    )Customer relationships
    
    
    49,280
    
    
    
    (6,787
    )
    
    
    49,280
    
    
    
    (4,316
    )Patents and technology
    
    
    38,345
    
    
    
    (2,945
    )
    
    
    38,345
    
    
    
    (1,316
    )Total
    
    $
    89,327
    
    
    $
    (10,199
    )
    
    $
    89,327
    
    
    $
    (5,979
    )Unamortized intangible assets:Trademarks
    
    $
    101,711
    
    
    
    
    
    
    $
    101,711
  Team
    
    IndividualSports
    
    Sports
    
    ConsolidatedBalance as of July 2, 2005
    
    $
    41,607
    
    
    $
    59,937
    
    
    $
    101,544
  7




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##### Table of Contents

10

5. LONG-TERM DEBT
  July 2,
    
    December 31,2005
    
    2004Senior Secured Credit Facility:Term loan facility
    
    $
    109,175
    
    
    $
    109,725Revolving credit facility
    
    
    30,000
    
    
    
    8.375% Senior subordinated notes due 2012
    
    
    140,000
    
    
    
    140,000Capital lease obligations
    
    
    316
    
    
    
    373Total long-term debt
    
    
    279,491
    
    
    
    250,098Less: Current maturities of long-term debt
    
    
    1,173
    
    
    
    1,184Revolving credit facility
    
    
    30,000
    
    
    
    Long-term debt, less current portion
    
    $
    248,318
    
    
    $
    248,914
    8




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6. INVENTORIES
   July 2,
    
    December 31,2005
    
    2004Raw materials
    
    $
    9,558
    
    
    $
    7,925Work-in-process
    
    
    1,738
    
    
    
    2,034Finished goods
    
    
    48,774
    
    
    
    39,684Inventories, net
    
    $
    60,070
    
    
    $
    49,643
 7. RECENT ACCOUNTING PRONOUNCEMENTS
 
 9




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8. SEGMENT REPORTING
   Team
    
    IndividualFiscal Quarter Ended
    
    Sports
    
    Sports
    
    ConsolidatedJuly 2, 2005Net sales
    
    $
    37,562
    
    
    $
    66,219
    
    
    $
    103,781Income from operations
    
    
    7,296
    
    
    
    8,525
    
    
    
    15,821Depreciation
    
    
    406
    
    
    
    868
    
    
    
    1,274Capital expenditures
    
    
    847
    
    
    
    648
    
    
    
    1,495June 30, 2004Net sales
    
    $
    33,698
    
    
    $
    
    
    
    $
    33,698Income from operations
    
    
    5,404
    
    
    
    
    
    
    
    5,404Depreciation
    
    
    539
    
    
    
    
    
    
    
    539Capital expenditures
    
    
    118
    
    
    
    
    
    
    
    118
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Team
    
    IndividualTwo Fiscal Quarters
Ended
    
    Sports
    
    Sports
    
    ConsolidatedJuly 2, 2005Net sales
    
    $
    65,776
    
    
    $
    125,238
    
    
    $
    191,014Income from operations
    
    
    9,785
    
    
    
    14,689
    
    
    
    24,474Depreciation
    
    
    841
    
    
    
    1,713
    
    
    
    2,554Capital expenditures
    
    
    1,149
    
    
    
    1,108
    
    
    
    2,257June 30, 2004Net sales
    
    $
    61,912
    
    
    $
    
    
    
    $
    61,912Income from operations
    
    
    8,546
    
    
    
    
    
    
    
    8,546Depreciation
    
    
    1,054
    
    
    
    
    
    
    
    1,054Capital expenditures
    
    
    317
    
    
    
    
    
    
    
    317
 Team
    
    IndividualSports
    
    Sports
    
    ConsolidatedAssetsAs of July 2, 2005
    
    $
    182,427
    
    
    $
    327,052
    
    
    $
    509,479As of December 31, 2004
    
    
    160,190
    
    
    
    310,386
    
    
    
    470,576
  Fiscal
Quarter Ended
    

Two
Fiscal
Quarters EndedJuly 2,
    
    June 30,
    
    July 2,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Segment income from
operations
    
    $
    15,821
    
    
    $
    5,404
    
    
    $
    24,474
    
    
    $
    8,546Variable stock
compensation expense
    
    
    (932
    )
    
    
    (115
    )
    
    
    (1,391
    )
    
    
    (231
    )Restructuring and other
infrequent expense
    
    
    ( 458
    )
    
    
    
    
    
    
    (1,205
    )
    
    
    Amortization of intangibles
    
    
    ( 2,106
    )
    
    
    ( 1,089
    )
    
    
    (4,220
    )
    
    
    (1,746
    )Consolidated income from
operations
    
    $
    12,325
    
    
    $
    4,200
    
    
    $
    17,658
    
    
    $
    6,569
 9. PRODUCT LIABILITY AND OTHER CONTINGENCIES
  11




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10. PROVISION FOR INCOME TAXES
  12




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 GENERAL
 On
September 30, 2004, pursuant to a merger agreement, we acquired
Bell Sports Corp. and its subsidiaries. The transactions relating to
the acquisition are more fully described in Note 2 to our
condensed consolidated financial statements. In this report, Bell
Sports Corp. and its consolidated subsidiaries are referred to as
Bell Sports and Riddell Sports Group, Inc. and its consolidated
subsidiaries are referred to as Riddell Sports, and the merger and
the related financing transactions are referred to as the
Transactions.
    RESULTS OF OPERATIONS
 Net Sales
   Change Due toPeriod Ended
    
    Change
    
    AcquisitionJuly 2,
    
    June 30,2005
    
    2004
    
    $
    
    %
    
    $
    
    %Net sales for the
fiscal quarter ended
    
    $
    103.8
    
    
    $
    33.7
    
    
    $
    70.1
    
    
    
    208.0
    %
    
    $
    66.2
    
    
    
    94.4
    %Net sales for the
two fiscal quarters ended
    
    $
    191.0
    
    
    $
    61.9
    
    
    $
    129.1
    
    
    
    208.5
    %
    
    $
    125.2
    
    
    
    97.0
    %
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Quarter EndedJuly 2,
    
    % of
    
    June 30,
    
    % of
    
    Change due to2005
    
    Net Sales
    
    2004
    
    Net Sales
    
    acquisitionGross profit
    
    $
    39.1
    
    
    
    37.5
    %
    
    $
    15.0
    
    
    
    44.6
    %
    
    $
    21.8Selling, general and
administrative expenses
    
    
    24.6
    
    
    
    23.7
    %
    
    
    9.7
    
    
    
    28.8
    %
    
    
    14.3Amortization of intangibles
    
    
    2.1
    
    
    
    2.0
    %
    
    
    1.1
    
    
    
    3.3
    %
    
    
    1.4Income from operations
    
    $
    12.4
    
    
    
    11.8
    %
    
    $
    4.2
    
    
    
    12.5
    %
    
    $
    6.1
 Two
Fiscal Quarters EndedChangeJuly 2,
    
    % of
    
    June 30,
    
    % of
    
    due to2005
    
    Net Sales
    
    2004
    
    Net Sales
    
    acquisitionGross profit
    
    $
    70.3
    
    
    
    36.8
    %
    
    $
    26.9
    
    
    
    43.5
    %
    
    $
    41.7Selling, general and
administrative expenses
    
    
    48.4
    
    
    
    25.3
    %
    
    
    18.6
    
    
    
    30.0
    %
    
    
    28.4Amortization of intangibles
    
    
    4.2
    
    
    
    2.2
    %
    
    
    1.7
    
    
    
    2.9
    %
    
    
    2.7Income from operations
    
    $
    17.7
    
    
    
    9.3
    %
    
    $
    6.6
    
    
    
    10.6
    %
    
    $
    10.6
 Gross Profit
  Selling, General and Administrative Expenses
  14




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Amortization of Intangibles
  Interest Expense.
  Provision for Income Taxes.
  RESTRUCTURING AND OTHER INFREQUENT EXPENSES
  Write-down of
    
    
    
    
    
    Employee
    
    FacilityProperty, Plant and
    
    Employee
    
    Retention
    
    ClosureEquipment
    
    Severance
    
    Payments
    
    Costs
    
    TotalFirst fiscal quarter of 2005:Provision
    
    $
    
    
    
    $
    567
    
    
    $
    
    
    
    $
    181
    
    
    $
    748Cash activity
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    (181
    )
    
    
    (230
    )Balances as of April 2, 2005
    
    
    
    
    
    
    518
    
    
    
    
    
    
    
    
    
    
    
    518
 15




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Write-down of
    
    
    
    
    
    Employee
    
    FacilityProperty, Plant and
    
    Employee
    
    Retention
    
    ClosureEquipment
    
    Severance
    
    Payments
    
    Costs
    
    TotalSecond
fiscal quarter of 2005:Provision (reversal)
    
    
    127
    
    
    
    (25
    )
    
    
    32
    
    
    
    325
    
    
    
    459Less:Non-cash activity
    
    
    (127
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (127
    )Cash activity
    
    
    
    
    
    
    (291
    )
    
    
    (26
    )
    
    
    (325
    )
    
    
    (642
    )Balances as of July 2, 2005
    
    $
    
    
    
    $
    202
    
    
    $
    6
    
    
    $
    
    
    
    $
    208
  LIQUIDITY AND CAPITAL RESOURCES
     16




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st
     17




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  18




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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
   
 ITEM 4: CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Uncertainty of Forward-Looking Statements and Information
  20




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PART II. OTHER INFORMATION
 
 ITEM 6. EXHIBITS
 Exhibit
    
    Description of Exhibit3.1
    
    Restated
Articles of Incorporation of Bell Sports, Inc.31.1
    
    Certification of William N. Fry31.2
    
    Certification of Jeffrey L. Gregg32.0
    
    Certification of William N. Fry
and Jeffrey L. Gregg
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SIGNATURES
  RIDDELL BELL HOLDINGS, INC.RegistrantDated: August 16, 2005
    
    /s/ Jeffrey L. GreggJeffrey L. GreggExecutive Vice President and Chief Financial Officer(Principal Financial Officer)
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