##### 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 September 29, 2007
 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
    
    20-1636283(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)7855 Haskell Avenue, Suite 200Van Nuys, California
    
    91406(Address of principal executive offices)
    
    (Zip Code)
 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 September 29, 2007 (unaudited) and December 30, 2006
    
    
    3Consolidated Statements of Operations and Comprehensive Income for the Fiscal Quarter and Three Fiscal
Quarters Ended September 29, 2007 (unaudited) and September 30, 2006 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Three Fiscal Quarters Ended September 29, 2007 (unaudited) and
September 30, 2006 (unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    32PART II. OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 6. Exhibits
    
    
    34SIGNATURES
    
    
    35Certification 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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##### 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)
 September 29,
    
    
    December 30,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    15,344
    
    
    $
    9,899Accounts receivable, net
    
    
    225,748
    
    
    
    182,234Inventories, net
    
    
    127,487
    
    
    
    134,847Prepaid expenses
    
    
    7,412
    
    
    
    10,449Deferred taxes
    
    
    10,224
    
    
    
    10,224Other current assets
    
    
    1,317
    
    
    
    1,611Total current assets
    
    
    387,532
    
    
    
    349,264Property, plant and equipment, net
    
    
    38,253
    
    
    
    34,198Deferred financing fees, net
    
    
    16,527
    
    
    
    19,271Intangible assets, net
    
    
    320,576
    
    
    
    330,445Goodwill
    
    
    206,298
    
    
    
    207,327Other assets
    
    
    5,309
    
    
    
    7,555Total assets
    
    $
    974,495
    
    
    $
    948,060LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    3,350
    
    
    $
    3,350Revolving credit facility
    
    
    10,000
    
    
    
    3,500Current portion of capital lease obligations
    
    
    26
    
    
    
    36Accounts payable
    
    
    58,542
    
    
    
    56,950Accrued expenses
    
    
    46,624
    
    
    
    60,405Total current liabilities
    
    
    118,542
    
    
    
    124,241Long-term debt, less current portion
    
    
    466,625
    
    
    
    469,138Capital lease obligations, less current portion
    
    
    150
    
    
    
    174Deferred taxes
    
    
    31,512
    
    
    
    23,681Other non-current liabilities
    
    
    12,192
    
    
    
    12,664Total liabilities
    
    
    629,021
    
    
    
    629,898Stockholders Equity:Common stock; $0.01 par value, 100 shares authorized, 100 shares
issued and outstanding at September 29, 2007 and December 30, 2006
    
    
    
    
    
    
    Additional paid-in capital
    
    
    336,557
    
    
    
    334,432Accumulated earnings (deficit)
    
    
    3,674
    
    
    
    (16,509
    )Accumulated other comprehensive income
    
    
    5,243
    
    
    
    239Total stockholders equity
    
    
    345,474
    
    
    
    318,162Total liabilities and stockholders equity
    
    $
    974,495
    
    
    $
    948,060
  3




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 (Unaudited and amounts in thousands)
 Fiscal Quarter Ended
    
    
    Three Fiscal Quarters EndedSeptember 29,
    
    
    September 30,
    
    
    September 29,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    188,565
    
    
    $
    186,485
    
    
    $
    569,570
    
    
    $
    495,932Cost of sales
    
    
    123,217
    
    
    
    120,552
    
    
    
    369,325
    
    
    
    333,217Gross profit
    
    
    65,348
    
    
    
    65,933
    
    
    
    200,245
    
    
    
    162,715Selling, general and administrative expenses
    
    
    39,375
    
    
    
    42,916
    
    
    
    124,893
    
    
    
    111,014Management expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,250Restructuring expenses
    
    
    488
    
    
    
    81
    
    
    
    589
    
    
    
    625Amortization of intangibles
    
    
    3,352
    
    
    
    3,410
    
    
    
    9,869
    
    
    
    9,162Gain on sale of property, plant and equipment
    
    
    (487
    )
    
    
    
    
    
    
    (2,339
    )
    
    
    Income from operations
    
    
    22,620
    
    
    
    19,526
    
    
    
    67,233
    
    
    
    33,664Interest expense, net
    
    
    10,165
    
    
    
    10,617
    
    
    
    31,950
    
    
    
    33,323Income before income taxes
    
    
    12,455
    
    
    
    8,909
    
    
    
    35,283
    
    
    
    341Income tax expense
    
    
    5,610
    
    
    
    5,204
    
    
    
    15,100
    
    
    
    160Net income
    
    
    6,845
    
    
    
    3,705
    
    
    
    20,183
    
    
    
    181Other comprehensive income:Foreign currency translation adjustment
    
    
    2,582
    
    
    
    48
    
    
    
    5,004
    
    
    
    1,503Comprehensive income
    
    $
    9,427
    
    
    $
    3,753
    
    
    $
    25,187
    
    
    $
    1,684
  4




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited and amounts in thousands)
 Three Fiscal Quarters EndedSeptember 29,
    
    
    September 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    20,183
    
    
    $
    181Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    17,216
    
    
    
    15,381Amortization of deferred financing fees
    
    
    2,744
    
    
    
    2,718Deferred financing fees written off in connection with refinancing
    
    
    
    
    
    
    1,613Stock compensation expense
    
    
    2,123
    
    
    
    2,289Deferred income tax expense (benefit)
    
    
    7,831
    
    
    
    (3,923
    )Gain on sale of property, plant and equipment
    
    
    (2,339
    )
    
    
    Disposal of property, plant and equipment
    
    
    116
    
    
    
    Write-down of property, plant and equipment
    
    
    
    
    
    
    564Changes in operating assets and liabilities, net of effects from purchase of businesses:Accounts receivable, net
    
    
    (38,547
    )
    
    
    (39,538
    )Inventories, net
    
    
    9,534
    
    
    
    10,625Other current and non-current assets
    
    
    4,634
    
    
    
    1,030Accounts payable
    
    
    1,131
    
    
    
    8,375Accrued expenses
    
    
    (14,862
    )
    
    
    1,031Other current and non-current liabilities
    
    
    (619
    )
    
    
    136Net cash provided by operating activities
    
    
    9,145
    
    
    
    482Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (11,382
    )
    
    
    (10,268
    )Proceeds from sale of property, plant and equipment
    
    
    3,331
    
    
    
    Settlement of preacquisition contingency
    
    
    2,178
    
    
    
    Purchase of businesses, net of cash acquired
    
    
    (1,569
    )
    
    
    (405,852
    )Net cash used in investing activities
    
    
    (7,442
    )
    
    
    (416,120
    )Cash flows from financing activities:Proceeds from issuance of senior term notes
    
    
    
    
    
    
    335,000Payments on old senior term notes
    
    
    
    
    
    
    (110,300
    )Payments on new senior term notes
    
    
    (2,513
    )
    
    
    Proceeds from revolving credit facility
    
    
    99,100
    
    
    
    85,004Payments on revolving credit facility
    
    
    (92,600
    )
    
    
    (65,504
    )Payments on capital lease obligations
    
    
    (34
    )
    
    
    (49
    )Repurchase of shares
    
    
    
    
    
    
    (4,270
    )Capital contribution
    
    
    
    
    
    
    191,453Payment of debt issuance costs
    
    
    
    
    
    
    (11,902
    )Net cash provided by financing activities
    
    
    3,953
    
    
    
    419,432Effect of exchange rate changes on cash and cash equivalents
    
    
    (211
    )
    
    
    1,503Increase in cash and cash equivalents
    
    
    5,445
    
    
    
    5,297Cash and cash equivalents, beginning of period
    
    
    9,899
    
    
    
    3,632Cash and cash equivalents, end of period
    
    $
    15,344
    
    
    $
    8,929
  5




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited and amounts in thousands, except as specified)
 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, Inc. and its consolidated subsidiaries, respectively, in each case, prior to their
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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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
    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
 7




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
   Pro formaThree FiscalQuarters EndedSeptember 30,2006Net sales
    
    $
    551,306Net income
    
    
    6,507
 Other Acquisitions
   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 first fiscal quarter
    
    
    (686
    )
    
    
    (52
    )
    
    
    (738
    )Balance as of March 31, 2007
    
    $
    1,204
    
    
    $
    2,186
    
    
    $
    3,390Less amounts paid during the second fiscal quarter
    
    
    (962
    )
    
    
    (576
    )
    
    
    (1,538
    )Balance as of June 30, 2007
    
    $
    242
    
    
    $
    1,610
    
    
    $
    1,852Provision
    
    
    
    
    
    
    487
    
    
    
    487Less amounts paid during the third fiscal quarter
    
    
    
    
    
    
    (785
    )
    
    
    (785
    )Balance as of September 29, 2007
    
    $
    242
    
    
    $
    1,312
    
    
    $
    1,554
  8




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
  4. Goodwill and Other Intangible Assets
  September 29, 2007
    
    
    December 30, 2006Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmounts
    
    
    Amortization
    
    
    Amounts
    
    
    AmortizationAmortizable intangible assets:Trademarks and tradenames
    
    $
    1,702
    
    
    $
    (1,025
    )
    
    $
    1,702
    
    
    $
    (840
    )Customer relationships
    
    
    59,180
    
    
    
    (18,683
    )
    
    
    59,180
    
    
    
    (14,787
    )Patents
    
    
    60,345
    
    
    
    (15,284
    )
    
    
    60,345
    
    
    
    (10,441
    )Licensing and other
    
    
    5,900
    
    
    
    (1,943
    )
    
    
    5,900
    
    
    
    (998
    )Total
    
    $
    127,127
    
    
    $
    (36,935
    )
    
    $
    127,127
    
    
    $
    (27,066
    )Indefinite-lived intangible assets:Trademarks and tradenames
    
    $
    230,384
    
    
    
    
    
    
    $
    230,384
  Team
    
    
    ActionSports
    
    
    Sports
    
    
    ConsolidatedGoodwill balance as of September 29, 2007
    
    $
    144,550
    
    
    $
    61,748
    
    
    $
    206,298
    9




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 5. Long-Term Debt
  September 29, 2007
    
    
    December 30, 2006Senior Secured Credit Facility:Term loan facility
    
    $
    329,975
    
    
    $
    332,488U. S. revolving credit facility
    
    
    10,000
    
    
    
    3,5008.375% Senior subordinated notes due 2012
    
    
    140,000
    
    
    
    140,000Capital lease obligations
    
    
    176
    
    
    
    210Total long-term debt
    
    
    480,151
    
    
    
    476,198Less current maturities of long-term debt and revolving credit facility
    
    
    (13,376
    )
    
    
    (6,886
    )Long-term debt, less current portion
    
    $
    466,775
    
    
    $
    469,312
 Senior Credit Agreement
      10




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Senior Subordinated Notes
    Other
  Debtors Accounting for a Modification or Exchange of Debt
Instruments
   11




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 6. Accrued Expenses
  September 29, 2007
    
    
    December 30, 2006Salaries, wages, commissions and bonuses
    
    $
    8,515
    
    
    $
    13,902Advertising
    
    
    5,650
    
    
    
    6,009Rebates
    
    
    4,421
    
    
    
    2,634Interest
    
    
    6,176
    
    
    
    3,604Warranty
    
    
    3,288
    
    
    
    2,981Restructuring
    
    
    1,554
    
    
    
    4,128Royalties
    
    
    1,461
    
    
    
    2,458Defective products
    
    
    1,138
    
    
    
    1,990Product
liability - current portion
    
    
    1,792
    
    
    
    2,162Other
    
    
    12,629
    
    
    
    20,537Total accrued expenses
    
    $
    46,624
    
    
    $
    60,405
 7. Inventories
   September 29, 2007
    
    
    December 30, 2006Raw materials
    
    $
    13,368
    
    
    $
    18,220Work-in-process
    
    
    1,586
    
    
    
    3,550Finished goods
    
    
    112,533
    
    
    
    113,077Inventories, net
    
    $
    127,487
    
    
    $
    134,847
 8. Recent Accounting Pronouncements
 Fair Value Measurements.
 12




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 9. Segment Reporting
   Team
    
    ActionFiscal Quarter Ended
    
    Sports
    
    Sports
    
    ConsolidatedSeptember 29, 2007Net sales
    
    $
    105,904
    
    
    $
    82,661
    
    
    $
    188,565Income from operations
    
    
    19,468
    
    
    
    10,390
    
    
    
    29,858Depreciation
    
    
    1,132
    
    
    
    1,017
    
    
    
    2,149Capital expenditures
    
    
    1,072
    
    
    
    3,088
    
    
    
    4,160September 30, 2006Net sales
    
    $
    106,838
    
    
    $
    79,647
    
    
    $
    186,485Income from operations
    
    
    15,744
    
    
    
    11,957
    
    
    
    27,701Depreciation
    
    
    1,318
    
    
    
    973
    
    
    
    2,291Capital expenditures
    
    
    1,230
    
    
    
    1,885
    
    
    
    3,115
 Team
    
    ActionThree Fiscal Quarters Ended
    
    Sports
    
    Sports
    
    ConsolidatedSeptember 29, 2007Net sales
    
    $
    333,340
    
    
    $
    236,230
    
    
    $
    569,570Income from operations
    
    
    63,248
    
    
    
    27,036
    
    
    
    90,284Depreciation
    
    
    3,451
    
    
    
    2,954
    
    
    
    6,405Capital expenditures
    
    
    2,922
    
    
    
    8,460
    
    
    
    11,382September 30, 2006Net sales
    
    $
    275,391
    
    
    $
    220,541
    
    
    $
    495,932Income from operations
    
    
    31,399
    
    
    
    31,234
    
    
    
    62,633Depreciation
    
    
    3,366
    
    
    
    2,853
    
    
    
    6,219Capital expenditures
    
    
    2,394
    
    
    
    7,874
    
    
    
    10,268
 Team
    
    ActionSports
    
    Sports
    
    ConsolidatedAssetsAs of September 29, 2007
    
    $
    607,455
    
    
    $
    367,040
    
    
    $
    974,495As of December 30, 2006
    
    
    587,267
    
    
    
    360,793
    
    
    
    948,060
  Fiscal Quarter Ended
    
    
    Three Fiscal Quarters EndedSeptember 29,
    
    
    September 30,
    
    
    September 29,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Segment income from operations
    
    $
    29,858
    
    
    $
    27,701
    
    
    $
    90,284
    
    
    $
    62,633Stock compensation expense
    
    
    (722
    )
    
    
    (749
    )
    
    
    (2,123
    )
    
    
    (2,289
    )Management expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,250
    )Corporate expenses
    
    
    (2,676
    )
    
    
    (3,935
    )
    
    
    (10,470
    )
    
    
    (8,643
    )Restructuring expenses
    
    
    (488
    )
    
    
    (81
    )
    
    
    (589
    )
    
    
    (625
    )Amortization of intangibles
    
    
    (3,352
    )
    
    
    (3,410
    )
    
    
    (9,869
    )
    
    
    (9,162
    )Consolidated income from operations
    
    $
    22,620
    
    
    $
    19,526
    
    
    $
    67,233
    
    
    $
    33,664
 13




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 10. Product Liability, Litigation and Other Contingencies
 Product Liability
   Litigation and Other Contingencies
  11. Income Taxes
 Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109, Accounting for Income Taxes
    14




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
   12. Derivative Instruments and Hedging Activity
 Accounting for Derivative Instruments and Hedging Activities
   13. Stock-Based Employee Compensation
  15




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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
   Fiscal Quarter Ended
    
    
    Three Fiscal Quarters EndedSeptember 29,
    
    
    September 30,
    
    
    September 29,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Unit based compensation expense
    
    $
    722
    
    
    $
    749
    
    
    $
    2,123
    
    
    $
    2,289
   Weighted AverageNumber
    
    Grant Dateof Units
    
    Fair ValueOutstanding at December 30, 2006
    
    
    30,887,736
    
    
    $
    2.11Forfeited
    
    
    (3,198,526
    )
    
    $
    2.14Outstanding at March 31, 2007
    
    
    27,689,210
    
    
    $
    2.11Granted
    
    
    1,050,000
    
    
    $
    1.76Forfeited
    
    
    (582,529
    )
    
    $
    2.14Outstanding at June 30, 2007
    
    
    28,156,681
    
    
    $
    2.09Forfeited
    
    
    (425,000
    )
    
    $
    2.14Outstanding at September 29, 2007
    
    
    27,731,681
    
    
    $
    2.09Vested Units at September 29, 2007
    
    
    5,502,927
    
    
    $
    2.02
  14. Warranty Obligations
  16




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
  2007
    
    
    2006Beginning of fiscal year
    
    $
    2,981
    
    
    $
    3,047Warranty costs incurred during the period
    
    
    (1,502
    )
    
    
    (417
    )Warranty cost liability recorded during the period
    
    
    1,445
    
    
    
    481End of first fiscal quarter
    
    
    2,924
    
    
    
    3,111Warranty costs incurred during the period
    
    
    (1,501
    )
    
    
    (1,271
    )Warranty cost liability recorded during the period
    
    
    1,643
    
    
    
    1,345End of second fiscal quarter
    
    
    3,066
    
    
    
    3,185Warranty costs incurred during the period
    
    
    (1,519
    )
    
    
    (1,012
    )Warranty cost liability recorded during the period
    
    
    1,741
    
    
    
    1,070End of third fiscal quarter
    
    $
    3,288
    
    
    $
    3,243
 15. Related Party Transactions
     Easton Easton
 17




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
    16. Supplemental Guarantor Condensed Financial Information
   18




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Consolidating Balance Sheet
September 29, 2007
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    8,180
    
    
    $
    4,486
    
    
    $
    2,678
    
    
    $
    
    
    
    $
    15,344Accounts receivable, net
    
    
    
    
    
    
    179,100
    
    
    
    46,648
    
    
    
    
    
    
    
    225,748Inventories, net
    
    
    
    
    
    
    110,298
    
    
    
    17,189
    
    
    
    
    
    
    
    127,487Prepaid expenses
    
    
    603
    
    
    
    6,147
    
    
    
    662
    
    
    
    
    
    
    
    7,412Deferred taxes
    
    
    534
    
    
    
    9,690
    
    
    
    
    
    
    
    
    
    
    
    10,224Other current assets
    
    
    
    
    
    
    1,167
    
    
    
    150
    
    
    
    
    
    
    
    1,317Total current assets
    
    
    9,317
    
    
    
    310,888
    
    
    
    67,327
    
    
    
    
    
    
    
    387,532Property, plant and equipment, net
    
    
    9,145
    
    
    
    27,828
    
    
    
    1,280
    
    
    
    
    
    
    
    38,253Deferred financing fees, net
    
    
    16,527
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,527Investments and intercompany receivables
    
    
    457,562
    
    
    
    46,066
    
    
    
    11,432
    
    
    
    (515,060
    )
    
    
    Intangible assets, net
    
    
    
    
    
    
    314,297
    
    
    
    6,279
    
    
    
    
    
    
    
    320,576Goodwill
    
    
    16,195
    
    
    
    184,912
    
    
    
    5,191
    
    
    
    
    
    
    
    206,298Other assets
    
    
    
    
    
    
    5,309
    
    
    
    
    
    
    
    
    
    
    
    5,309Total assets
    
    $
    508,746
    
    
    $
    889,300
    
    
    $
    91,509
    
    
    $
    (515,060
    )
    
    $
    974,495Liabilities & Stockholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    3,350
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,350Revolving credit facility
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Current portion of capital lease obligations
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    26Accounts payable
    
    
    
    
    
    
    53,017
    
    
    
    5,525
    
    
    
    
    
    
    
    58,542Accrued expenses
    
    
    
    
    
    
    35,904
    
    
    
    10,720
    
    
    
    
    
    
    
    46,624Total current liabilities
    
    
    13,350
    
    
    
    88,947
    
    
    
    16,245
    
    
    
    
    
    
    
    118,542Long-term debt, less current portion
    
    
    466,625
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    466,625Capital lease obligations, less current portion
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    150Deferred taxes
    
    
    
    
    
    
    27,710
    
    
    
    3,802
    
    
    
    
    
    
    
    31,512Other non-current liabilities
    
    
    1,123
    
    
    
    5,766
    
    
    
    5,303
    
    
    
    
    
    
    
    12,192Long-term intercompany payables
    
    
    
    
    
    
    472,332
    
    
    
    7,836
    
    
    
    (480,168
    )
    
    
    Total liabilities
    
    
    481,098
    
    
    
    594,905
    
    
    
    33,186
    
    
    
    (480,168
    )
    
    
    629,021Stockholders equity
    
    
    27,648
    
    
    
    294,395
    
    
    
    58,323
    
    
    
    (34,892
    )
    
    
    345,474Total liabilities & stockholders equity
    
    $
    508,746
    
    
    $
    889,300
    
    
    $
    91,509
    
    
    $
    (515,060
    )
    
    $
    974,495
 19




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Consolidating Statement of Operations
Fiscal Quarter Ended September 29, 2007
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    170,481
    
    
    $
    26,453
    
    
    $
    (8,369
    )
    
    $
    188,565Cost of sales
    
    
    100
    
    
    
    113,255
    
    
    
    18,231
    
    
    
    (8,369
    )
    
    
    123,217Gross profit
    
    
    (100
    )
    
    
    57,226
    
    
    
    8,222
    
    
    
    
    
    
    
    65,348Selling, general and administrative expenses
    
    
    3,429
    
    
    
    33,402
    
    
    
    2,544
    
    
    
    
    
    
    
    39,375Restructuring expenses
    
    
    
    
    
    
    488
    
    
    
    
    
    
    
    
    
    
    
    488Amortization of intangibles
    
    
    
    
    
    
    3,185
    
    
    
    167
    
    
    
    
    
    
    
    3,352Gain on sale of property, plant and equipment
    
    
    
    
    
    
    (487
    )
    
    
    
    
    
    
    
    
    
    
    (487
    )(Loss) income from operations
    
    
    (3,529
    )
    
    
    20,638
    
    
    
    5,511
    
    
    
    
    
    
    
    22,620Interest expense (income), net
    
    
    9,965
    
    
    
    225
    
    
    
    (25
    )
    
    
    
    
    
    
    10,165Share of net income (loss) of subsidiaries under equity method
    
    
    20,339
    
    
    
    3,966
    
    
    
    
    
    
    
    (24,305
    )
    
    
    Income (loss) before income taxes
    
    
    6,845
    
    
    
    24,379
    
    
    
    5,536
    
    
    
    (24,305
    )
    
    
    12,455Income tax expense
    
    
    
    
    
    
    4,040
    
    
    
    1,570
    
    
    
    
    
    
    
    5,610Net income (loss)
    
    $
    6,845
    
    
    $
    20,339
    
    
    $
    3,966
    
    
    $
    (24,305
    )
    
    $
    6,845
 Consolidating Statement of Operations
Fiscal Quarter Ended September 30, 2006
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    171,208
    
    
    $
    23,483
    
    
    $
    (8,206
    )
    
    $
    186,485Cost of sales
    
    
    
    
    
    
    111,545
    
    
    
    17,213
    
    
    
    (8,206
    )
    
    
    120,552Gross profit
    
    
    
    
    
    
    59,663
    
    
    
    6,270
    
    
    
    
    
    
    
    65,933Selling, general and administrative expenses
    
    
    3,652
    
    
    
    36,611
    
    
    
    2,653
    
    
    
    
    
    
    
    42,916Restructuring expenses
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    81Amortization of intangibles
    
    
    
    
    
    
    3,225
    
    
    
    185
    
    
    
    
    
    
    
    3,410(Loss) income from operations
    
    
    (3,652
    )
    
    
    19,746
    
    
    
    3,432
    
    
    
    
    
    
    
    19,526Interest expense (income), net
    
    
    10,333
    
    
    
    317
    
    
    
    (33
    )
    
    
    
    
    
    
    10,617Share of net income (loss) of subsidiaries under equity method
    
    
    17,690
    
    
    
    1,038
    
    
    
    
    
    
    
    (18,728
    )
    
    
    Income (loss) before income taxes
    
    
    3,705
    
    
    
    20,467
    
    
    
    3,465
    
    
    
    (18,728
    )
    
    
    8,909Income tax expense
    
    
    
    
    
    
    2,777
    
    
    
    2,427
    
    
    
    
    
    
    
    5,204Net income (loss)
    
    $
    3,705
    
    
    $
    17,690
    
    
    $
    1,038
    
    
    $
    (18,728
    )
    
    $
    3,705
 20




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Consolidating Statement of Operations
Three Fiscal Quarters Ended September 29, 2007
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    524,181
    
    
    $
    78,360
    
    
    $
    (32,971
    )
    
    $
    569,570Cost of sales
    
    
    232
    
    
    
    346,210
    
    
    
    55,854
    
    
    
    (32,971
    )
    
    
    369,325Gross profit
    
    
    (232
    )
    
    
    177,971
    
    
    
    22,506
    
    
    
    
    
    
    
    200,245Selling, general and administrative expenses
    
    
    12,544
    
    
    
    104,788
    
    
    
    7,561
    
    
    
    
    
    
    
    124,893Restructuring expenses
    
    
    
    
    
    
    589
    
    
    
    
    
    
    
    
    
    
    
    589Amortization of intangibles
    
    
    
    
    
    
    9,376
    
    
    
    493
    
    
    
    
    
    
    
    9,869Gain on sale of property, plant and equipment
    
    
    
    
    
    
    (2,339
    )
    
    
    
    
    
    
    
    
    
    
    (2,339
    )(Loss) income from operations
    
    
    (12,776
    )
    
    
    65,557
    
    
    
    14,452
    
    
    
    
    
    
    
    67,233Interest expense (income), net
    
    
    31,376
    
    
    
    706
    
    
    
    (132
    )
    
    
    
    
    
    
    31,950Share of net income (loss) of subsidiaries under equity method
    
    
    64,335
    
    
    
    10,165
    
    
    
    
    
    
    
    (74,500
    )
    
    
    Income (loss) before income taxes
    
    
    20,183
    
    
    
    75,016
    
    
    
    14,584
    
    
    
    (74,500
    )
    
    
    35,283Income tax expense
    
    
    
    
    
    
    10,681
    
    
    
    4,419
    
    
    
    
    
    
    
    15,100Net income (loss)
    
    $
    20,183
    
    
    $
    64,335
    
    
    $
    10,165
    
    
    $
    (74,500
    )
    
    $
    20,183
 Consolidating Statement of Operations
Three Fiscal Quarters Ended September 30, 2006
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    451,112
    
    
    $
    63,527
    
    
    $
    (18,707
    )
    
    $
    495,932Cost of sales
    
    
    
    
    
    
    307,626
    
    
    
    44,298
    
    
    
    (18,707
    )
    
    
    333,217Gross profit
    
    
    
    
    
    
    143,486
    
    
    
    19,229
    
    
    
    
    
    
    
    162,715Selling, general and administrative expenses
    
    
    8,017
    
    
    
    97,114
    
    
    
    5,883
    
    
    
    
    
    
    
    111,014Management expenses
    
    
    8,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,250Restructuring expenses
    
    
    
    
    
    
    625
    
    
    
    
    
    
    
    
    
    
    
    625Amortization of intangibles
    
    
    
    
    
    
    8,689
    
    
    
    473
    
    
    
    
    
    
    
    9,162(Loss) income from operations
    
    
    (16,267
    )
    
    
    37,058
    
    
    
    12,873
    
    
    
    
    
    
    
    33,664Interest expense (income), net
    
    
    32,535
    
    
    
    840
    
    
    
    (52
    )
    
    
    
    
    
    
    33,323Share of net income (loss) of subsidiaries under equity method
    
    
    48,983
    
    
    
    11,785
    
    
    
    
    
    
    
    (60,768
    )
    
    
    Income (loss) before income taxes
    
    
    181
    
    
    
    48,003
    
    
    
    12,925
    
    
    
    (60,768
    )
    
    
    341Income tax (benefit) expense
    
    
    
    
    
    
    (980
    )
    
    
    1,140
    
    
    
    
    
    
    
    160Net income (loss)
    
    $
    181
    
    
    $
    48,983
    
    
    $
    11,785
    
    
    $
    (60,768
    )
    
    $
    181
 21




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##### 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
Three Fiscal Quarters Ended September 29, 2007
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    20,183
    
    
    $
    64,335
    
    
    $
    10,165
    
    
    $
    (74,500
    )
    
    $
    20,183Non-cash adjustments
    
    
    (11,405
    )
    
    
    (44,465
    )
    
    
    9,061
    
    
    
    74,500
    
    
    
    27,691Changes in operating assets and liabilities, net of
effects from purchase of businesses
    
    
    (1,799
    )
    
    
    (15,385
    )
    
    
    (21,545
    )
    
    
    
    
    
    
    (38,729
    )Net cash provided by (used in) operating activities
    
    
    6,979
    
    
    
    4,485
    
    
    
    (2,319
    )
    
    
    
    
    
    
    9,145Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (4,313
    )
    
    
    (6,590
    )
    
    
    (479
    )
    
    
    
    
    
    
    (11,382
    )Proceeds from sale of property, plant and equipment
    
    
    
    
    
    
    3,331
    
    
    
    
    
    
    
    
    
    
    
    3,331Settlement of preacquisition contingency
    
    
    
    
    
    
    2,178
    
    
    
    
    
    
    
    
    
    
    
    2,178Purchase of businesses, net of cash acquired
    
    
    
    
    
    
    (1,569
    )
    
    
    
    
    
    
    
    
    
    
    (1,569
    )Net cash used in investing activities
    
    
    (4,313
    )
    
    
    (2,650
    )
    
    
    (479
    )
    
    
    
    
    
    
    (7,442
    )Cash flows from financing activities:Payments on capital lease obligations
    
    
    
    
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    (34
    )Payments on new senior term notes
    
    
    (2,513
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,513
    )Proceeds from credit facilities, net
    
    
    6,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,500Net cash provided by (used in) financing activities
    
    
    3,987
    
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    3,953Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (211
    )
    
    
    
    
    
    
    (211
    )Increase (decrease) in cash and cash equivalents
    
    
    6,653
    
    
    
    1,801
    
    
    
    (3,009
    )
    
    
    
    
    
    
    5,445Cash and cash equivalents, beginning of period
    
    
    1,527
    
    
    
    2,685
    
    
    
    5,687
    
    
    
    
    
    
    
    9,899Cash and cash equivalents, end of period
    
    $
    8,180
    
    
    $
    4,486
    
    
    $
    2,678
    
    
    $
    
    
    
    $
    15,344
 Condensed Consolidating Statement of Cash Flows
Three Fiscal Quarters Ended September 30, 2006
 Guarantor
    
    
    NonGuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    181
    
    
    $
    48,983
    
    
    $
    11,785
    
    
    $
    (60,768
    )
    
    $
    181Non-cash adjustments
    
    
    (384,864
    )
    
    
    317,437
    
    
    
    25,301
    
    
    
    60,768
    
    
    
    18,642Changes in operating assets and liabilities, net of
effects from purchase of business
    
    
    (16,087
    )
    
    
    22,584
    
    
    
    (24,838
    )
    
    
    
    
    
    
    (18,341
    )Net cash (used in) provided by operating activities
    
    
    (400,770
    )
    
    
    389,004
    
    
    
    12,248
    
    
    
    
    
    
    
    482Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (4,317
    )
    
    
    (4,365
    )
    
    
    (1,586
    )
    
    
    
    
    
    
    (10,268
    )Purchase of business, net of cash acquired
    
    
    (16,195
    )
    
    
    (381,768
    )
    
    
    (7,889
    )
    
    
    
    
    
    
    (405,852
    )Net cash used in investing activities
    
    
    (20,512
    )
    
    
    (386,133
    )
    
    
    (9,475
    )
    
    
    
    
    
    
    (416,120
    )Cash flows from financing activities:Payments on capital lease obligations
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    
    
    
    
    (49
    )Proceeds from revolving credit facility, net
    
    
    19,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,500Proceeds from senior secured credit facility, net
    
    
    224,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    224,700Payments of debt issuance costs
    
    
    (11,902
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,902
    )Capital contributed by member, net
    
    
    187,183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187,183Net cash provided by (used in) financing activities
    
    
    419,481
    
    
    
    (49
    )
    
    
    
    
    
    
    
    
    
    
    419,432Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    1,352
    
    
    
    151
    
    
    
    
    
    
    
    1,503(Decrease) increase in cash and cash equivalents
    
    
    (1,801
    )
    
    
    4,174
    
    
    
    2,924
    
    
    
    
    
    
    
    5,297Cash and cash equivalents, beginning of period
    
    
    3,876
    
    
    
    (526
    )
    
    
    282
    
    
    
    
    
    
    
    3,632Cash and cash equivalents, end of period
    
    $
    2,075
    
    
    $
    3,648
    
    
    $
    3,206
    
    
    $
    
    
    
    $
    8,929
 22




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##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 17. Prior Quarter Purchase Accounting Adjustment
  Fiscal Quarter Ended
    
    Three Fiscal Quarters EndedAs Previously
    
    
    
    
    
    As PreviouslyFiled
    
    (Restated)
    
    Filed
    
    (Restated)(Dollars in thousands)September 30, 2006:Net sales
    
    $
    186,485
    
    
    $
    186,485
    
    
    $
    495,932
    
    
    $
    495,932Cost of sales
    
    
    118,059
    
    
    
    120,552
    
    
    
    328,082
    
    
    
    333,217Gross profit
    
    
    68,426
    
    
    
    65,933
    
    
    
    167,850
    
    
    
    162,715Income from operations
    
    
    22,019
    
    
    
    19,526
    
    
    
    38,799
    
    
    
    33,664Income tax expense
    
    
    5,673
    
    
    
    5,204
    
    
    
    2,796
    
    
    
    160Net income
    
    
    5,729
    
    
    
    3,705
    
    
    
    2,680
    
    
    
    181
 23




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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
  24




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##### Table of Contents



Cost of Sales
  Gross Profit
  Selling, General and Administrative Expenses
  RESULTS OF OPERATIONS
  Fiscal Quarter EndedSeptember 29,
    
    
    % of
    
    
    September 30,
    
    
    % of2007
    
    
    Net Sales
    
    
    2006
    
    
    Net Sales(Dollars in thousands)Net sales
    
    $
    188,565
    
    
    
    100.0
    %
    
    $
    186,485
    
    
    
    100.0
    %Cost of sales
    
    
    123,217
    
    
    
    65.3
    %
    
    
    120,552
    
    
    
    64.6
    %Gross profit
    
    
    65,348
    
    
    
    34.7
    %
    
    
    65,933
    
    
    
    35.4
    %Selling, general and administrative expenses
    
    
    39,375
    
    
    
    20.9
    %
    
    
    42,916
    
    
    
    23.0
    %Restructuring expenses
    
    
    488
    
    
    
    0.2
    %
    
    
    81
    
    
    
    0.1
    %Amortization of intangibles
    
    
    3,352
    
    
    
    1.8
    %
    
    
    3,410
    
    
    
    1.8
    %Gain on sale of property, plant and equipment
    
    
    (487
    )
    
    
    (0.2
    )%
    
    
    
    
    
    
    Income from operations
    
    $
    22,620
    
    
    
    12.0
    %
    
    $
    19,526
    
    
    
    10.5
    %
 Three Fiscal Quarters Ended
    
    Change DueSeptember 29,
    
    
    % of
    
    
    September 30,
    
    
    % of
    
    
    to2007
    
    
    Net Sales
    
    
    2006
    
    
    Net Sales
    
    
    Acquisitions(Dollars in thousands)Net sales
    
    $
    569,570
    
    
    
    100.0
    %
    
    $
    495,932
    
    
    
    100.0
    %
    
    $
    48,858Cost of sales
    
    
    369,325
    
    
    
    64.8
    %
    
    
    333,217
    
    
    
    67.2
    %
    
    
    13,064Gross profit
    
    
    200,245
    
    
    
    35.2
    %
    
    
    162,715
    
    
    
    32.8
    %
    
    
    35,794Selling, general and administrative expenses
    
    
    124,893
    
    
    
    22.0
    %
    
    
    111,014
    
    
    
    22.4
    %
    
    
    5,335Management expenses
    
    
    
    
    
    
    
    
    
    
    8,250
    
    
    
    1.7
    %
    
    
    Restructuring expenses
    
    
    589
    
    
    
    0.1
    %
    
    
    625
    
    
    
    0.1
    %
    
    
    Amortization of intangibles
    
    
    9,869
    
    
    
    1.7
    %
    
    
    9,162
    
    
    
    1.8
    %
    
    
    707Gain on sale of property, plant and equipment
    
    
    (2,339
    )
    
    
    (0.4
    )%
    
    
    
    
    
    
    
    
    
    
    (487
    )Income from operations
    
    $
    67,233
    
    
    
    11.8
    %
    
    $
    33,664
    
    
    
    6.8
    %
    
    $
    30,239
 25




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##### Table of Contents



Net Sales
   Fiscal Quarter Ended
    
    
    
    
    
    
    
    
    
    Change Due toSeptember 29,
    
    September 30,
    
    Change
    
    Acquisitions2007
    
    2006
    
    $
    
    %
    
    $
    
    %(Dollars in thousands)Net sales for the fiscal quarter ended
    
    $
    188,565
    
    
    $
    186,485
    
    
    $
    2,080
    
    
    
    1.1
    %
    
    $
    
    
    
    
    
    %Net sales for the three fiscal quarters ended
    
    $
    569,570
    
    
    $
    495,932
    
    
    $
    73,638
    
    
    
    14.8
    %
    
    $
    48,858
    
    
    
    9.9
    %
 Cost of Sales
   Gross Profit
  26




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##### Table of Contents



Selling, General and Administrative Expenses
   Management Expenses
   Restructuring Expenses
  Amortization of Intangibles
   Gain on Sale of Property, Plant and Equipment
  Interest Expense
  27




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##### Table of Contents



Income Tax Expense
   RESTRUCTURING
  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 first fiscal quarter
    
    
    (686
    )
    
    
    (52
    )
    
    
    (738
    )Balance as of March 31, 2007
    
    $
    1,204
    
    
    $
    2,186
    
    
    $
    3,390Less amounts paid during the second fiscal quarter
    
    
    (962
    )
    
    
    (576
    )
    
    
    (1,538
    )Balance as of June 30, 2007
    
    $
    242
    
    
    $
    1,610
    
    
    $
    1,852Provision
    
    
    
    
    
    
    487
    
    
    
    487Less amounts paid during the third fiscal quarter
    
    
    
    
    
    
    (785
    )
    
    
    (785
    )Balance as of September 29, 2007
    
    $
    242
    
    
    $
    1,312
    
    
    $
    1,554
   LIQUIDITY AND CAPITAL RESOURCES
   28




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##### Table of Contents



Senior Secured Credit Facility
      Senior Subordinated Notes
   29




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##### Table of Contents



Other Matters
         OUTLOOK
  Combination with Easton Sports.
 Amortization of Intangibles. Business Combinations
 Net Sales and Income from Operations.
 30




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##### Table of Contents



Seasonality.
 Integration Progress and Synergies.
 Introduction of New Products. Giro Riddell Easton Bell Giro Easton
 ERP Implementation.
 Interest Expense and Debt Repayment.
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  31




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##### Table of Contents



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
   32




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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
  33




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##### Table of Contents



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
 34




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##### Table of Contents



SIGNATURES
  EASTON-BELL SPORTS, INC.
RegistrantDated: November 13, 2007
    /s/ Anthony M. PalmaAnthony M. PalmaChief Executive OfficerDated: November 13, 2007
    /s/ Mark TrippMark TrippChief Financial Officer
(Principal Financial Officer) 35