##### 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 June 30, 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(State or other jurisdiction of 
incorporation or organization)
    
    20-1636283(I.R.S. Employer
Identification No.)
 
 7855 Haskell Avenue, Suite 200
Van Nuys, California 91406  (Address of principal executive offices)(Zip Code)
 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 June 30, 2007 (unaudited) and December 30, 2006
    
    
    3Consolidated Statements of Operations and Comprehensive Income (Loss) for the Fiscal Quarter and Two Fiscal
Quarters Ended June 30, 2007 (unaudited) and July 1, 2006 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Two Fiscal Quarters Ended June 30, 2007 (unaudited) and
July 1, 2006 (unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    35PART II. OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    36Item 6. Exhibits
    
    
    36SIGNATURES
    
    
    37Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  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)
 June 30,
    
    
    December 30,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,827
    
    
    $
    9,899Accounts receivable, net
    
    
    232,223
    
    
    
    182,234Inventories, net
    
    
    128,482
    
    
    
    134,847Prepaid expenses
    
    
    7,051
    
    
    
    10,449Deferred taxes
    
    
    10,224
    
    
    
    10,224Other current assets
    
    
    1,619
    
    
    
    1,611Total current assets
    
    
    387,426
    
    
    
    349,264Property, plant and equipment, net
    
    
    36,672
    
    
    
    34,198Deferred financing fees, net
    
    
    17,063
    
    
    
    19,271Intangible assets, net
    
    
    323,928
    
    
    
    330,445Goodwill
    
    
    206,298
    
    
    
    207,327Other assets
    
    
    5,937
    
    
    
    7,555Total assets
    
    $
    977,324
    
    
    $
    948,060LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    3,350
    
    
    $
    3,350Revolving credit facility
    
    
    30,000
    
    
    
    3,500Current portion of capital lease obligations
    
    
    31
    
    
    
    36Accounts payable
    
    
    55,718
    
    
    
    56,950Accrued expenses
    
    
    43,609
    
    
    
    60,405Total current liabilities
    
    
    132,708
    
    
    
    124,241Long-term debt, less current portion
    
    
    467,463
    
    
    
    469,138Capital lease obligations, less current portion
    
    
    156
    
    
    
    174Deferred taxes
    
    
    29,731
    
    
    
    23,681Other non-current liabilities
    
    
    11,942
    
    
    
    12,664Total liabilities
    
    
    642,000
    
    
    
    629,898Stockholders Equity:Common stock; $0.01 par value, 100 shares
authorized, 100 shares issued and
outstanding at June 30, 2007 and December
30, 2006
    
    
    
    
    
    
    Additional paid-in capital
    
    
    335,834
    
    
    
    334,432Accumulated deficit
    
    
    (3,171
    )
    
    
    (16,509
    )Accumulated other comprehensive income
    
    
    2,661
    
    
    
    239Total stockholders equity
    
    
    335,324
    
    
    
    318,162Total liabilities and stockholders equity
    
    $
    977,324
    
    
    $
    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 Ended
    
    
    Two Fiscal Quarters EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    206,370
    
    
    $
    198,275
    
    
    $
    381,004
    
    
    $
    309,447Cost of sales
    
    
    129,986
    
    
    
    138,358
    
    
    
    246,107
    
    
    
    212,665Gross profit
    
    
    76,384
    
    
    
    59,917
    
    
    
    134,897
    
    
    
    96,782Selling, general and administrative expenses
    
    
    43,291
    
    
    
    40,801
    
    
    
    85,517
    
    
    
    68,098Management expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,250Restructuring and other infrequent expenses
    
    
    52
    
    
    
    269
    
    
    
    101
    
    
    
    544Amortization of intangibles
    
    
    3,352
    
    
    
    3,411
    
    
    
    6,517
    
    
    
    5,752Income from operations
    
    
    29,689
    
    
    
    15,436
    
    
    
    42,762
    
    
    
    14,138Interest expense, net
    
    
    10,878
    
    
    
    11,225
    
    
    
    21,785
    
    
    
    22,706Gain on sale of property
    
    
    1,852
    
    
    
    
    
    
    
    1,852
    
    
    
    Income (loss) before income taxes
    
    
    20,663
    
    
    
    4,211
    
    
    
    22,829
    
    
    
    (8,568
    )Income tax expense (benefit)
    
    
    8,602
    
    
    
    (9
    )
    
    
    9,491
    
    
    
    (5,044
    )Net income (loss)
    
    
    12,061
    
    
    
    4,220
    
    
    
    13,338
    
    
    
    (3,524
    )Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    2,190
    
    
    
    1,640
    
    
    
    2,422
    
    
    
    1,455Comprehensive income (loss)
    
    $
    14,251
    
    
    $
    5,860
    
    
    $
    15,760
    
    
    $
    (2,069
    )
  4




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited and amounts in thousands)
 Two Fiscal Quarters EndedJune 30,
    
    
    July 1,2007
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    13,338
    
    
    $
    (3,524
    )Adjustments to reconcile net income (loss) to net cash
used in operating activities:Depreciation and amortization
    
    
    11,397
    
    
    
    9,681Amortization of deferred financing fees
    
    
    2,208
    
    
    
    1,115Deferred financing fees written off during refinancing
    
    
    
    
    
    
    1,613Stock compensation expense
    
    
    1,402
    
    
    
    1,540Deferred income tax expense (benefit)
    
    
    6,050
    
    
    
    (8,589
    )Gain on sale of property held for sale
    
    
    (1,852
    )
    
    
    Disposal of property, plant and equipment
    
    
    75
    
    
    
    Write-down of property, plant and equipment
    
    
    
    
    
    
    304Changes in operating assets and liabilities, net of
effects from purchase of businesses:Accounts receivable, net
    
    
    (47,227
    )
    
    
    (34,298
    )Inventories, net
    
    
    7,648
    
    
    
    976Other current and non-current assets
    
    
    4,065
    
    
    
    638Accounts payable
    
    
    (1,719
    )
    
    
    13,167Accrued expenses
    
    
    (17,397
    )
    
    
    2,525Other current and non-current liabilities
    
    
    (722
    )
    
    
    (640
    )Net cash used in operating activities
    
    
    (22,734
    )
    
    
    (15,492
    )Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (7,222
    )
    
    
    (7,073
    )Proceeds from sale of property held for sale
    
    
    2,741
    
    
    
    Settlement of preacquisition contingency
    
    
    2,178
    
    
    
    Purchase of businesses, net of cash acquired
    
    
    (1,569
    )
    
    
    (387,015
    )Net cash used in investing activities
    
    
    (3,872
    )
    
    
    (394,088
    )Cash flows from financing activities:Proceeds from issuance of senior term notes
    
    
    
    
    
    
    335,000Payments on old senior term notes
    
    
    
    
    
    
    (109,462
    )Payments on new senior term notes
    
    
    (1,675
    )
    
    
    Proceeds from revolving credit facility
    
    
    88,100
    
    
    
    65,404Payments on revolving credit facility
    
    
    (61,600
    )
    
    
    (55,904
    )Payments on capital lease obligations
    
    
    (23
    )
    
    
    (37
    )Repurchase of shares
    
    
    
    
    
    
    (4,270
    )Capital contribution
    
    
    
    
    
    
    191,403Payment of debt issuance costs
    
    
    
    
    
    
    (11,902
    )Net cash provided by financing activities
    
    
    24,802
    
    
    
    410,232Effect of exchange rate changes on cash and cash equivalents
    
    
    (268
    )
    
    
    1,455(Decrease) increase in cash and cash equivalents
    
    
    (2,072
    )
    
    
    2,107Cash and cash equivalents, beginning of period
    
    
    9,899
    
    
    
    3,632Cash and cash equivalents, end of period
    
    $
    7,827
    
    
    $
    5,739
  5




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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)
 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
   7




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
  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 formaTwo FiscalQuarters EndedJuly 1,2006Net sales
    
    $
    364,821Net loss
    
    
    (334
    )
 Other Acquisitions
   3. Restructuring
  8




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 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
    
    
    $
    1,852
   4. Goodwill and Other Intangible Assets
  June 30, 2007
    
    
    December 30, 2006Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmounts
    
    
    Amortization
    
    
    Amounts
    
    
    AmortizationAmortizable intangible assets:Trademarks and tradenames
    
    $
    1,702
    
    
    $
    (963
    )
    
    $
    1,702
    
    
    $
    (840
    )Customer relationships
    
    
    59,180
    
    
    
    (17,322
    )
    
    
    59,180
    
    
    
    (14,787
    )Patents
    
    
    60,345
    
    
    
    (13,670
    )
    
    
    60,345
    
    
    
    (10,441
    )Licensing and other
    
    
    5,900
    
    
    
    (1,628
    )
    
    
    5,900
    
    
    
    (998
    )Total
    
    $
    127,127
    
    
    $
    (33,583
    )
    
    $
    127,127
    
    
    $
    (27,066
    )Indefinite-lived intangible assets:Trademarks and tradenames
    
    $
    230,384
    
    
    
    
    
    
    $
    230,384
  Team
    
    
    Action
    
    
    ConsolidatedSports
    
    
    SportsGoodwill balance as of June 30, 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
  June 30, 2007
    
    
    December 30, 2006Senior Secured Credit Facility:Term loan facility
    
    $
    330,813
    
    
    $
    332,488U. S. revolving credit facility
    
    
    30,000
    
    
    
    3,5008.375% Senior subordinated notes due 2012
    
    
    140,000
    
    
    
    140,000Capital lease obligations
    
    
    187
    
    
    
    210Total long-term debt
    
    
    501,000
    
    
    
    476,198Less current maturities of long-term
debt and revolving credit facility
    
    
    (33,381
    )
    
    
    (6,886
    )Long-term debt, less current portion
    
    $
    467,619
    
    
    $
    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
    11




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Other
  Debtors Accounting for a Modification or Exchange of Debt
Instruments
   6. Accrued Expenses
  June 30, 2007
    
    
    December 30, 2006Salaries, wages, commissions and bonuses
    
    $
    10,412
    
    
    $
    13,902Advertising
    
    
    6,127
    
    
    
    6,009Rebates
    
    
    4,434
    
    
    
    2,634Interest
    
    
    3,404
    
    
    
    3,604Warranty
    
    
    3,066
    
    
    
    2,981Restructuring
    
    
    1,852
    
    
    
    4,128Royalties
    
    
    1,697
    
    
    
    2,458Defective products
    
    
    1,438
    
    
    
    1,990Product liability  current portion
    
    
    692
    
    
    
    2,162Other
    
    
    10,487
    
    
    
    20,537Total accrued expenses
    
    $
    43,609
    
    
    $
    60,405
 12




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 7. Inventories
   June 30, 2007
    
    
    December 30, 2006Raw materials
    
    $
    18,136
    
    
    $
    18,220Work-in-process
    
    
    2,370
    
    
    
    3,550Finished goods
    
    
    107,976
    
    
    
    113,077Inventories, net
    
    $
    128,482
    
    
    $
    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.
 9. Segment Reporting
  13




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EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
  Team
    
    ActionFiscal Quarter Ended
    
    Sports
    
    Sports
    
    ConsolidatedJune 30, 2007Net sales
    
    $
    125,453
    
    
    $
    80,917
    
    
    $
    206,370Income from operations
    
    
    29,957
    
    
    
    8,603
    
    
    
    38,560Depreciation
    
    
    1,157
    
    
    
    1,281
    
    
    
    2,438Capital expenditures
    
    
    527
    
    
    
    2,460
    
    
    
    2,987July 1, 2006Net sales
    
    $
    122,309
    
    
    $
    75,966
    
    
    $
    198,275Income from operations
    
    
    12,329
    
    
    
    9,793
    
    
    
    22,122Depreciation
    
    
    708
    
    
    
    925
    
    
    
    1,633Capital expenditures
    
    
    610
    
    
    
    2,743
    
    
    
    3,353
 Team
    
    ActionTwo Fiscal Quarters Ended
    
    Sports
    
    Sports
    
    ConsolidatedJune 30, 2007Net sales
    
    $
    227,428
    
    
    $
    153,576
    
    
    $
    381,004Income from operations
    
    
    42,596
    
    
    
    16,031
    
    
    
    58,627Depreciation
    
    
    2,320
    
    
    
    2,560
    
    
    
    4,880Capital expenditures
    
    
    1,850
    
    
    
    5,372
    
    
    
    7,222July 1, 2006Net sales
    
    $
    168,553
    
    
    $
    140,894
    
    
    $
    309,447Income from operations
    
    
    14,959
    
    
    
    18,398
    
    
    
    33,357Depreciation
    
    
    2,044
    
    
    
    1,885
    
    
    
    3,929Capital expenditures
    
    
    1,061
    
    
    
    6,012
    
    
    
    7,073
 Team
    
    ActionSports
    
    Sports
    
    ConsolidatedAssetsAs of June 30, 2007
    
    $
    605,796
    
    
    $
    371,528
    
    
    $
    977,324As of December 30, 2006
    
    
    587,267
    
    
    
    360,793
    
    
    
    948,060
  Fiscal Quarter Ended
    
    
    Two Fiscal Quarters EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Segment income from operations
    
    $
    38,560
    
    
    $
    22,122
    
    
    $
    58,627
    
    
    $
    33,357Stock compensation expense
    
    
    (706
    )
    
    
    (1,491
    )
    
    
    (1,402
    )
    
    
    (1,540
    )Management expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,250
    )Corporate expenses
    
    
    (4,761
    )
    
    
    (1,515
    )
    
    
    (7,845
    )
    
    
    (3,133
    )Restructuring and other infrequent expenses
    
    
    (52
    )
    
    
    (269
    )
    
    
    (101
    )
    
    
    (544
    )Amortization of intangibles
    
    
    (3,352
    )
    
    
    (3,411
    )
    
    
    (6,517
    )
    
    
    (5,752
    )Consolidated income from operations
    
    $
    29,689
    
    
    $
    15,436
    
    
    $
    42,762
    
    
    $
    14,138
 14




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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
    15




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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
  Share Based Payment Accounting for Stock Based Compensation
 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)
 Shared Based Payment
   Fiscal Quarter Ended
    
    
    Two Fiscal Quarters EndedJune 30,
    
    
    July 1,
    
    
    June 30,
    
    
    July 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Unit based compensation expense
    
    $
    706
    
    
    $
    1,491
    
    
    $
    1,402
    
    
    $
    1,540
   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
    
    
    $
    2.09Vested Units at June 30, 2007
    
    
    4,915,832
    
    
    $
    2.00
  14. Warranty Obligations
  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)
  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 1st 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 2nd fiscal quarter
    
    $
    3,066
    
    
    $
    3,185
 15. Related Party Transactions
     Easton Easton
 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)
    16. Supplemental Guarantor Condensed Financial Information
   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 Balance Sheet
June 30, 2007
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    2,665
    
    
    $
    3,675
    
    
    $
    1,487
    
    
    $
    
    
    
    $
    7,827Accounts receivable, net
    
    
    
    
    
    
    189,587
    
    
    
    42,636
    
    
    
    
    
    
    
    232,223Inventories, net
    
    
    
    
    
    
    111,202
    
    
    
    17,280
    
    
    
    
    
    
    
    128,482Prepaid expenses
    
    
    1,236
    
    
    
    5,527
    
    
    
    288
    
    
    
    
    
    
    
    7,051Deferred taxes
    
    
    5,206
    
    
    
    5,018
    
    
    
    
    
    
    
    
    
    
    
    10,224Other current assets
    
    
    
    
    
    
    1,472
    
    
    
    147
    
    
    
    
    
    
    
    1,619Total current assets
    
    
    9,107
    
    
    
    316,481
    
    
    
    61,838
    
    
    
    
    
    
    
    387,426Property, plant and equipment, net
    
    
    8,085
    
    
    
    27,252
    
    
    
    1,335
    
    
    
    
    
    
    
    36,672Deferred financing fees, net
    
    
    17,063
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,063Investments and intercompany receivables
    
    
    498,097
    
    
    
    
    
    
    
    4,344
    
    
    
    (502,441
    )
    
    
    Intangible assets, net
    
    
    
    
    
    
    317,449
    
    
    
    6,479
    
    
    
    
    
    
    
    323,928Goodwill
    
    
    16,195
    
    
    
    184,912
    
    
    
    5,191
    
    
    
    
    
    
    
    206,298Other assets
    
    
    
    
    
    
    5,937
    
    
    
    
    
    
    
    
    
    
    
    5,937Total assets
    
    $
    548,547
    
    
    $
    852,031
    
    
    $
    79,187
    
    
    $
    (502,441
    )
    
    $
    977,324Liabilities & Stockholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    3,350
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,350Revolving credit facility
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000Current portion of capital lease obligations
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    31Accounts payable
    
    
    
    
    
    
    45,738
    
    
    
    9,980
    
    
    
    
    
    
    
    55,718Accrued expenses
    
    
    
    
    
    
    34,455
    
    
    
    9,154
    
    
    
    
    
    
    
    43,609Total current liabilities
    
    
    33,350
    
    
    
    80,224
    
    
    
    19,134
    
    
    
    
    
    
    
    132,708Long-term debt, less current portion
    
    
    467,463
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    467,463Capital lease obligations, less current portion
    
    
    
    
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    156Deferred taxes
    
    
    
    
    
    
    25,929
    
    
    
    3,802
    
    
    
    
    
    
    
    29,731Other non-current liabilities
    
    
    1,123
    
    
    
    5,516
    
    
    
    5,303
    
    
    
    
    
    
    
    11,942Long-term intercompany payables
    
    
    
    
    
    
    468,354
    
    
    
    
    
    
    
    (468,354
    )
    
    
    Total liabilities
    
    
    501,936
    
    
    
    580,179
    
    
    
    28,239
    
    
    
    (468,354
    )
    
    
    642,000Total stockholders equity
    
    
    46,611
    
    
    
    271,852
    
    
    
    50,948
    
    
    
    (34,087
    )
    
    
    335,324Total liabilities & stockholders equity
    
    $
    548,547
    
    
    $
    852,031
    
    
    $
    79,187
    
    
    $
    (502,441
    )
    
    $
    977,324
 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
Fiscal Quarter Ended June 30, 2007
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    185,161
    
    
    $
    32,958
    
    
    $
    (11,749
    )
    
    $
    206,370Cost of sales
    
    
    90
    
    
    
    118,412
    
    
    
    23,233
    
    
    
    (11,749
    )
    
    
    129,986Gross profit
    
    
    (90
    )
    
    
    66,749
    
    
    
    9,725
    
    
    
    
    
    
    
    76,384Selling, general and administrative expenses
    
    
    5,343
    
    
    
    35,518
    
    
    
    2,430
    
    
    
    
    
    
    
    43,291Restructuring and other infrequent expenses
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    52Amortization of intangibles
    
    
    
    
    
    
    3,186
    
    
    
    166
    
    
    
    
    
    
    
    3,352(Loss) income from operations
    
    
    (5,433
    )
    
    
    27,993
    
    
    
    7,129
    
    
    
    
    
    
    
    29,689Interest expense, net
    
    
    10,663
    
    
    
    240
    
    
    
    (25
    )
    
    
    
    
    
    
    10,878Gain on sale of property
    
    
    
    
    
    
    1,852
    
    
    
    
    
    
    
    
    
    
    
    1,852Share of net income of subsidiaries under equity method
    
    
    28,690
    
    
    
    5,019
    
    
    
    
    
    
    
    (33,709
    )
    
    
    Income (loss) before income taxes
    
    
    12,594
    
    
    
    34,624
    
    
    
    7,154
    
    
    
    (33,709
    )
    
    
    20,663Income tax expense
    
    
    
    
    
    
    6,467
    
    
    
    2,135
    
    
    
    
    
    
    
    8,602Net income (loss)
    
    $
    12,594
    
    
    $
    28,157
    
    
    $
    5,019
    
    
    $
    (33,709
    )
    
    $
    12,061
 Consolidating Statement of Operations
Fiscal Quarter Ended July 1, 2006
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    175,752
    
    
    $
    31,237
    
    
    $
    (8,714
    )
    
    $
    198,275Cost of sales
    
    
    
    
    
    
    125,665
    
    
    
    21,407
    
    
    
    (8,714
    )
    
    
    138,358Gross profit
    
    
    
    
    
    
    50,087
    
    
    
    9,830
    
    
    
    
    
    
    
    59,917Selling, general and administrative expenses
    
    
    2,700
    
    
    
    35,556
    
    
    
    2,545
    
    
    
    
    
    
    
    40,801Restructuring and other infrequent expenses
    
    
    
    
    
    
    269
    
    
    
    
    
    
    
    
    
    
    
    269Amortization of intangibles
    
    
    
    
    
    
    3,240
    
    
    
    171
    
    
    
    
    
    
    
    3,411(Loss) income from operations
    
    
    (2,700
    )
    
    
    11,022
    
    
    
    7,114
    
    
    
    
    
    
    
    15,436Interest expense, net
    
    
    11,013
    
    
    
    230
    
    
    
    (18
    )
    
    
    
    
    
    
    11,225Share of net income of subsidiaries under equity method
    
    
    17,933
    
    
    
    7,134
    
    
    
    
    
    
    
    (25,067
    )
    
    
    Income (loss) before income taxes
    
    
    4,220
    
    
    
    17,926
    
    
    
    7,132
    
    
    
    (25,067
    )
    
    
    4,211Income tax (benefit)
    
    
    
    
    
    
    (7
    )
    
    
    (2
    )
    
    
    
    
    
    
    (9
    )Net income (loss)
    
    $
    4,220
    
    
    $
    17,933
    
    
    $
    7,134
    
    
    $
    (25,067
    )
    
    $
    4,220
 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)
 Consolidating Statement of Operations
Two Fiscal Quarters Ended June 30, 2007
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    353,700
    
    
    $
    51,907
    
    
    $
    (24,603
    )
    
    $
    381,004Cost of sales
    
    
    132
    
    
    
    232,955
    
    
    
    37,623
    
    
    
    (24,603
    )
    
    
    246,107Gross profit
    
    
    (132
    )
    
    
    120,745
    
    
    
    14,284
    
    
    
    
    
    
    
    134,897Selling, general and administrative expenses
    
    
    9,115
    
    
    
    71,386
    
    
    
    5,016
    
    
    
    
    
    
    
    85,517Restructuring and other infrequent expenses
    
    
    
    
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    101Amortization of intangibles
    
    
    
    
    
    
    6,191
    
    
    
    326
    
    
    
    
    
    
    
    6,517(Loss) income from operations
    
    
    (9,247
    )
    
    
    43,067
    
    
    
    8,942
    
    
    
    
    
    
    
    42,762Interest expense, net
    
    
    21,411
    
    
    
    481
    
    
    
    (107
    )
    
    
    
    
    
    
    21,785Gain on sale of property
    
    
    
    
    
    
    1,852
    
    
    
    
    
    
    
    
    
    
    
    1,852Share of net income of subsidiaries under equity method
    
    
    43,996
    
    
    
    6,199
    
    
    
    
    
    
    
    (50,195
    )
    
    
    Income (loss) before income taxes
    
    
    13,338
    
    
    
    50,637
    
    
    
    9,049
    
    
    
    (50,195
    )
    
    
    22,829Income tax expense
    
    
    
    
    
    
    6,641
    
    
    
    2,850
    
    
    
    
    
    
    
    9,491Net income (loss)
    
    $
    13,338
    
    
    $
    43,996
    
    
    $
    6,199
    
    
    $
    (50,195
    )
    
    $
    13,338
 Consolidating Statement of Operations
Two Fiscal Quarters Ended July 1, 2006
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    279,904
    
    
    $
    40,044
    
    
    $
    (10,501
    )
    
    $
    309,447Cost of sales
    
    
    
    
    
    
    196,081
    
    
    
    27,085
    
    
    
    (10,501
    )
    
    
    212,665Gross profit
    
    
    
    
    
    
    83,823
    
    
    
    12,959
    
    
    
    
    
    
    
    96,782Selling, general and administrative expenses
    
    
    4,365
    
    
    
    60,503
    
    
    
    3,230
    
    
    
    
    
    
    
    68,098Management expenses
    
    
    8,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,250Restructuring and other infrequent expenses
    
    
    
    
    
    
    544
    
    
    
    
    
    
    
    
    
    
    
    544Amortization of intangibles
    
    
    
    
    
    
    5,464
    
    
    
    288
    
    
    
    
    
    
    
    5,752(Loss) income from operations
    
    
    (12,615
    )
    
    
    17,312
    
    
    
    9,441
    
    
    
    
    
    
    
    14,138Interest expense, net
    
    
    22,202
    
    
    
    523
    
    
    
    (19
    )
    
    
    
    
    
    
    22,706Share of net income of subsidiaries under equity method
    
    
    31,293
    
    
    
    10,747
    
    
    
    
    
    
    
    (42,040
    )
    
    
    (Loss) income before income taxes
    
    
    (3,524
    )
    
    
    27,536
    
    
    
    9,460
    
    
    
    (42,040
    )
    
    
    (8,568
    )Income tax benefit
    
    
    
    
    
    
    (3,757
    )
    
    
    (1,287
    )
    
    
    
    
    
    
    (5,044
    )Net (loss) income
    
    $
    (3,524
    )
    
    $
    31,293
    
    
    $
    10,747
    
    
    $
    (42,040
    )
    
    $
    (3,524
    )
 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)
 Condensed Consolidating Statement of Cash Flows
Two Fiscal Quarters Ended June 30, 2007
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    13,338
    
    
    $
    43,996
    
    
    $
    6,199
    
    
    $
    (50,195
    )
    
    $
    13,338Non-cash adjustments
    
    
    (31,304
    )
    
    
    (6,586
    )
    
    
    6,975
    
    
    
    50,195
    
    
    
    19,280Changes in operating assets and liabilities, net of
effects from purchase of businesses
    
    
    (2,432
    )
    
    
    (36,067
    )
    
    
    (16,853
    )
    
    
    
    
    
    
    (55,352
    )Net cash (used in) provided by operating activities
    
    
    (20,398
    )
    
    
    1,343
    
    
    
    (3,679
    )
    
    
    
    
    
    
    (22,734
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (3,289
    )
    
    
    (3,680
    )
    
    
    (253
    )
    
    
    
    
    
    
    (7,222
    )Proceeds from sale of property held for sale
    
    
    
    
    
    
    2,741
    
    
    
    
    
    
    
    
    
    
    
    2,741Settlement of preacquisition contingency
    
    
    
    
    
    
    2,178
    
    
    
    
    
    
    
    
    
    
    
    2,178Purchase of businesses, net of cash acquired
    
    
    
    
    
    
    (1,569
    )
    
    
    
    
    
    
    
    
    
    
    (1,569
    )Net cash (used in) provided by investing activities
    
    
    (3,289
    )
    
    
    (330
    )
    
    
    (253
    )
    
    
    
    
    
    
    (3,872
    )Cash flows from financing activities:Payments on capital lease obligations
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    (23
    )Proceeds from credit facilities, net
    
    
    24,825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,825Net cash provided by (used in) financing activities
    
    
    24,825
    
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    24,802Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (268
    )
    
    
    
    
    
    
    (268
    )Increase (decrease) in cash and cash equivalents
    
    
    1,138
    
    
    
    990
    
    
    
    (4,200
    )
    
    
    
    
    
    
    (2,072
    )Cash and cash equivalents, beginning of period
    
    
    1,527
    
    
    
    2,685
    
    
    
    5,687
    
    
    
    
    
    
    
    9,899Cash and cash equivalents, end of period
    
    $
    2,665
    
    
    $
    3,675
    
    
    $
    1,487
    
    
    $
    
    
    
    $
    7,827
 Condensed Consolidating Statement of Cash Flows
Two Fiscal Quarters Ended July 1, 2006
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (3,524
    )
    
    $
    31,293
    
    
    $
    10,747
    
    
    $
    (42,040
    )
    
    $
    (3,524
    )Non-cash adjustments
    
    
    (391,156
    )
    
    
    316,979
    
    
    
    37,801
    
    
    
    42,040
    
    
    
    5,664Changes in operating assets and liabilities, net of
effects from purchase of business
    
    
    1,044
    
    
    
    18,792
    
    
    
    (37,468
    )
    
    
    
    
    
    
    (17,632
    )Net cash (used in) provided by operating activities
    
    
    (393,636
    )
    
    
    367,064
    
    
    
    11,080
    
    
    
    
    
    
    
    (15,492
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (2,317
    )
    
    
    (3,175
    )
    
    
    (1,581
    )
    
    
    
    
    
    
    (7,073
    )Purchase of business, net of cash acquired
    
    
    (15,481
    )
    
    
    (364,181
    )
    
    
    (7,353
    )
    
    
    
    
    
    
    (387,015
    )Net cash used in investing activities
    
    
    (17,798
    )
    
    
    (367,356
    )
    
    
    (8,934
    )
    
    
    
    
    
    
    (394,088
    )Cash flows from financing activities:Payments on capital lease obligations
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    
    
    
    
    (37
    )Proceeds from revolving credit facility, net
    
    
    9,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,500Proceeds from senior secured credit facility, net
    
    
    225,538
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,538Payments of debt issuance costs
    
    
    (11,902
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,902
    )Capital contributed by member, net
    
    
    187,133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187,133Net cash provided by (used in) financing activities
    
    
    410,269
    
    
    
    (37
    )
    
    
    
    
    
    
    
    
    
    
    410,232Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    1,820
    
    
    
    (365
    )
    
    
    
    
    
    
    1,455(Decrease) increase in cash and cash equivalents
    
    
    (1,165
    )
    
    
    1,491
    
    
    
    1,781
    
    
    
    
    
    
    
    2,107Cash and cash equivalents, beginning of period
    
    
    3,876
    
    
    
    (526
    )
    
    
    282
    
    
    
    
    
    
    
    3,632Cash and cash equivalents, end of period
    
    $
    2,711
    
    
    $
    965
    
    
    $
    2,063
    
    
    $
    
    
    
    $
    5,739
 23




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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
    
    
    Two Fiscal Quarters EndedAs Previously
    
    
    
    
    
    
    As PreviouslyFiled
    
    
    (Restated)
    
    
    Filed
    
    
    (Restated)(Dollars in thousands)July 1, 2006:Net sales
    
    $
    198,275
    
    
    $
    198,275
    
    
    $
    309,447
    
    
    $
    309,447Gross profit
    
    
    62,559
    
    
    
    59,917
    
    
    
    99,424
    
    
    
    96,782Income from operations
    
    
    18,078
    
    
    
    15,436
    
    
    
    16,780
    
    
    
    14,138Income tax expense (benefit)
    
    
    2,158
    
    
    
    (9
    )
    
    
    (2,877
    )
    
    
    (5,044
    )Net income (loss)
    
    
    4,695
    
    
    
    4,220
    
    
    
    (3,049
    )
    
    
    (3,524
    )
 24




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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
  25




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##### Table of Contents



Cost of Sales
  Gross Profit
  Selling, General and Administrative Expenses
  RESULTS OF OPERATIONS
  Fiscal Quarter EndedJune 30,
    
    
    % of
    
    
    July 1,
    
    
    % of2007
    
    
    Net Sales
    
    
    2006
    
    
    Net Sales(Dollars in thousands)Net sales
    
    $
    206,370
    
    
    
    100.0
    %
    
    $
    198,275
    
    
    
    100.0
    %Cost of sales
    
    
    129,986
    
    
    
    63.0
    %
    
    
    138,358
    
    
    
    69.8
    %Gross profit
    
    
    76,384
    
    
    
    37.0
    %
    
    
    59,917
    
    
    
    30.2
    %Selling, general and administrative expenses
    
    
    43,291
    
    
    
    21.0
    %
    
    
    40,801
    
    
    
    20.6
    %Restructuring and other infrequent expenses
    
    
    52
    
    
    
    0.0
    %
    
    
    269
    
    
    
    0.1
    %Amortization of intangibles
    
    
    3,352
    
    
    
    1.6
    %
    
    
    3,411
    
    
    
    1.7
    %Income from operations
    
    $
    29,689
    
    
    
    14.4
    %
    
    $
    15,436
    
    
    
    7.8
    %
 Two Fiscal Quarters Ended
    
    
    Change DueJune 30,
    
    
    % of
    
    
    July 1,
    
    
    % of
    
    
    to2007
    
    
    Net Sales
    
    
    2006
    
    
    Net Sales
    
    
    Acquisitions(Dollars in thousands)Net sales
    
    $
    381,004
    
    
    
    100.0
    %
    
    $
    309,447
    
    
    
    100.0
    %
    
    $
    56,360Cost of sales
    
    
    246,107
    
    
    
    64.6
    %
    
    
    212,665
    
    
    
    68.7
    %
    
    
    38,289Gross profit
    
    
    134,897
    
    
    
    35.4
    %
    
    
    96,782
    
    
    
    31.3
    %
    
    
    18,071Selling, general and administrative expenses
    
    
    85,517
    
    
    
    22.5
    %
    
    
    68,098
    
    
    
    22.0
    %
    
    
    8,544Management expenses
    
    
    
    
    
    
    0.0
    %
    
    
    8,250
    
    
    
    2.7
    %
    
    
    Restructuring and other infrequent expenses
    
    
    101
    
    
    
    0.0
    %
    
    
    544
    
    
    
    0.2
    %
    
    
    Amortization of intangibles
    
    
    6,517
    
    
    
    1.7
    %
    
    
    5,752
    
    
    
    1.8
    %
    
    
    830Income from operations
    
    $
    42,762
    
    
    
    11.2
    %
    
    $
    14,138
    
    
    
    4.6
    %
    
    $
    8,697
 26




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##### Table of Contents



Net Sales
   Fiscal Quarter Ended
    
    
    
    
    
    
    
    
    
    Change Due toJune 30,
    
    July 1,
    
    Change
    
    Acquisitions2007
    
    2006
    
    $
    
    %
    
    $
    
    %(Dollars in thousands)Net sales for the quarter ended
    
    $
    206,370
    
    
    $
    198,275
    
    
    $
    8,095
    
    
    
    4.1
    %
    
    $
    
    
    
    
    
    %Net sales for the two quarters ended
    
    $
    381,004
    
    
    $
    309,447
    
    
    $
    71,557
    
    
    
    23.1
    %
    
    $
    56,360
    
    
    
    18.2
    %
 Cost of Sales
   27




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##### Table of Contents



Gross Profit
   Selling, General and Administrative Expenses
   Management Expenses
   Restructuring and Other Infrequent Expenses
  Amortization of Intangibles
   28




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##### Table of Contents



Interest Expense and Gain on Sale of Property
   Income Tax Expense (Benefit)
   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
    )
    
    
    (2,276
    )Balance as of June 30, 2007
    
    $
    242
    
    
    $
    1,610
    
    
    $
    1,852
   29




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   Senior Secured Credit Facility
     30




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##### Table of Contents



Senior Subordinated Notes
   Other Matters
         31




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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
 32




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##### Table of Contents



ERP Implementation.
 Interest Expense and Debt Repayment.
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  33




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##### Table of Contents



Item 3: Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Risk
    Interest Rate Risk
   34




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##### Table of Contents



Item 4: Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
     Changes in Internal Control over Financial Reporting
  35




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 6. Exhibits
  The filings referenced forExhibit
    
    
    
    incorporation by referenceNumber
    
    Description of Exhibit
    
    are:31.1
    
    Certification of the 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
 36




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##### Table of Contents



SIGNATURES
  EASTON-BELL SPORTS, INC.
RegistrantDated:
August 14, 2007
    
    /s/ Anthony M. Palma

Anthony M. PalmaChief Executive OfficerDated:
August 14, 2007
    
    /s/ Mark Tripp

Mark TrippChief Financial Officer(Principal Financial Officer)
 37