##### 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 October 3, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 333-123927
 EASTON-BELL SPORTS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    20-1636283(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 
 7855 Haskell Avenue, Suite 200
Van Nuys, California 91406  (Address of principal executive offices)(Zip Code)
 (818) 902-5800  (Registrants telephone number, including area code)
 
 o þ
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o
 o þ




---



##### Table of Contents



EXPLANATORY NOTE
  2




---



##### 



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
 INDEX
  
 PagePART I. FINANCIAL INFORMATION:Item 1. Financial StatementsConsolidated Balance Sheets as of October 3, 2009 (unaudited) and January 3, 2009
    
    
    4Consolidated Statements of Operations and Comprehensive Income for the Fiscal Quarter
and Three Fiscal Quarters Ended October 3, 2009 (unaudited) and September 27, 2008
(unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Three Fiscal Quarters Ended October 3,
2009 (unaudited) and September 27, 2008 (unaudited)
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    32PART II. OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 6. Exhibits
    
    
    33SIGNATURES
    
    
    34EX-31.1EX-31.2EX-32.1
  3




---



##### 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)
 October 3,
    
    
    January 3,2009
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    49,674
    
    
    $
    41,301Accounts receivable, net
    
    
    213,952
    
    
    
    213,561Inventories, net
    
    
    128,434
    
    
    
    147,163Prepaid expenses
    
    
    4,916
    
    
    
    8,183Deferred taxes
    
    
    9,133
    
    
    
    9,128Other current assets
    
    
    9,668
    
    
    
    7,605Total current assets
    
    
    415,777
    
    
    
    426,941Property, plant and equipment, net
    
    
    46,727
    
    
    
    45,874Deferred financing fees, net
    
    
    9,372
    
    
    
    12,055Intangible assets, net
    
    
    293,763
    
    
    
    303,818Goodwill
    
    
    203,541
    
    
    
    203,456Other assets
    
    
    1,290
    
    
    
    5,501Total assets
    
    $
    970,470
    
    
    $
    997,645LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    3,350
    
    
    $
    12,405Current portion of capital lease obligations
    
    
    21
    
    
    
    22Accounts payable
    
    
    67,097
    
    
    
    81,245Accrued expenses
    
    
    46,028
    
    
    
    50,397Total current liabilities
    
    
    116,496
    
    
    
    144,069Long-term debt, less current portion
    
    
    408,792
    
    
    
    443,383Capital lease obligations, less current portion
    
    
    107
    
    
    
    123Deferred taxes
    
    
    44,840
    
    
    
    39,794Other noncurrent liabilities
    
    
    22,916
    
    
    
    23,252Total liabilities
    
    
    593,151
    
    
    
    650,621Stockholders equity:Common stock: $0.01 par value, 100 shares authorized, 100 shares issued and outstanding at
October 3, 2009 and January 3, 2009
    
    
    
    
    
    
    Additional paid-in capital
    
    
    356,837
    
    
    
    341,197Retained earnings
    
    
    22,528
    
    
    
    11,373Accumulated other comprehensive loss
    
    
    (2,046
    )
    
    
    (5,546
    )Total stockholders equity
    
    
    377,319
    
    
    
    347,024Total liabilities and stockholders equity
    
    $
    970,470
    
    
    $
    997,645
  4




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited and amounts in thousands)
 Fiscal Quarter Ended
    
    
    Three Fiscal Quarters EndedOctober 3,
    
    
    September 27,
    
    
    October 3,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    180,421
    
    
    $
    203,369
    
    
    $
    552,567
    
    
    $
    606,318Cost of sales
    
    
    118,460
    
    
    
    130,505
    
    
    
    370,025
    
    
    
    391,022Gross profit
    
    
    61,961
    
    
    
    72,864
    
    
    
    182,542
    
    
    
    215,296Selling, general and administrative expenses
    
    
    40,444
    
    
    
    46,127
    
    
    
    129,609
    
    
    
    135,767Restructuring and other infrequent expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    492Amortization of intangibles
    
    
    3,352
    
    
    
    3,352
    
    
    
    10,055
    
    
    
    10,055Income from operations
    
    
    18,165
    
    
    
    23,385
    
    
    
    42,878
    
    
    
    68,982Interest expense, net
    
    
    7,570
    
    
    
    9,469
    
    
    
    23,623
    
    
    
    21,636Income before income taxes
    
    
    10,595
    
    
    
    13,916
    
    
    
    19,255
    
    
    
    47,346Income tax expense
    
    
    4,306
    
    
    
    7,573
    
    
    
    8,100
    
    
    
    23,148Net income
    
    
    6,289
    
    
    
    6,343
    
    
    
    11,155
    
    
    
    24,198Other comprehensive income:Foreign currency translation adjustment
    
    
    1,530
    
    
    
    (1,098
    )
    
    
    3,500
    
    
    
    (1,800
    )Comprehensive income
    
    $
    7,819
    
    
    $
    5,245
    
    
    $
    14,655
    
    
    $
    22,398
  5




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and amounts in thousands)
 Three Fiscal Quarters EndedOctober 3,
    
    
    September 27,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    11,155
    
    
    $
    24,198Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    21,278
    
    
    
    19,068Amortization of deferred financing fees
    
    
    2,683
    
    
    
    2,683Equity compensation expense
    
    
    2,782
    
    
    
    2,944Deferred income tax expense
    
    
    5,041
    
    
    
    18,446Disposal of property, plant and equipment
    
    
    3
    
    
    
    12Changes in operating assets and liabilities:Accounts receivable, net
    
    
    3,070
    
    
    
    (42,767
    )Inventories, net
    
    
    20,455
    
    
    
    14,617Other current and noncurrent assets
    
    
    5,330
    
    
    
    (3,042
    )Accounts payable
    
    
    (14,739
    )
    
    
    5,618Accrued expenses
    
    
    (5,141
    )
    
    
    16,417Other current and noncurrent liabilities
    
    
    (336
    )
    
    
    3,466Net cash provided by operating activities
    
    
    51,581
    
    
    
    61,660Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (12,096
    )
    
    
    (10,955
    )Net cash used in investing activities
    
    
    (12,096
    )
    
    
    (10,955
    )Cash flows from financing activities:Payments on senior term notes
    
    
    (43,646
    )
    
    
    (2,512
    )Capital contribution from Parent
    
    
    12,858
    
    
    
    Proceeds from revolving credit facility
    
    
    6,000
    
    
    
    53,000Payments on revolving credit facility
    
    
    (6,000
    )
    
    
    (28,500
    )Payments on capital lease obligations
    
    
    (17
    )
    
    
    (16
    )Net cash (used in) provided by financing activities
    
    
    (30,805
    )
    
    
    21,972Effect of exchange rate changes on cash and cash equivalents
    
    
    (307
    )
    
    
    (81
    )Increase in cash and cash equivalents
    
    
    8,373
    
    
    
    72,596Cash and cash equivalents, beginning of period
    
    
    41,301
    
    
    
    16,923Cash and cash equivalents, end of period
    
    $
    49,674
    
    
    $
    89,519
  6




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 1. Basis of Presentation
    2. Goodwill and Other Intangible Assets
  October 3, 2009
    
    
    January 3, 2009Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmounts
    
    
    Amortization
    
    
    Amounts
    
    
    AmortizationAmortizable intangible assets:Trademarks and tradenames
    
    $
    1,702
    
    
    $
    (1,517
    )
    
    $
    1,702
    
    
    $
    (1,333
    )Customer relationships
    
    
    59,180
    
    
    
    (29,566
    )
    
    
    59,180
    
    
    
    (25,484
    )Patents
    
    
    60,345
    
    
    
    (28,202
    )
    
    
    60,345
    
    
    
    (23,358
    )Licensing and other
    
    
    5,900
    
    
    
    (4,463
    )
    
    
    5,900
    
    
    
    (3,518
    )Total
    
    $
    127,127
    
    
    $
    (63,748
    )
    
    $
    127,127
    
    
    $
    (53,693
    )Indefinite-lived intangible assets:Trademarks and tradenames
    
    $
    230,384
    
    
    
    
    
    
    $
    230,384
  Team
    
    
    ActionSports
    
    
    Sports
    
    
    ConsolidatedBalance as of January 3, 2009
    
    $
    141,992
    
    
    $
    61,464
    
    
    $
    203,456Adjustment to purchase price allocations
    
    
    85
    
    
    
    
    
    
    
    85Balance as of October 3, 2009
    
    $
    142,077
    
    
    $
    61,464
    
    
    $
    203,541
 Goodwill
  7




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 3. Long-Term Debt
  October 3, 2009
    
    
    January 3, 2009Senior Secured Credit Facility:Term loan facility
    
    $
    272,142
    
    
    $
    315,7888.375% Senior subordinated notes due 2012
    
    
    140,000
    
    
    
    140,000Capital lease obligations
    
    
    128
    
    
    
    145Total long-term debt
    
    
    412,270
    
    
    
    455,933Less current maturities of long-term debt
    
    
    (3,371
    )
    
    
    (12,427
    )Long-term debt, less current portion
    
    $
    408,899
    
    
    $
    443,506
 Senior Secured Credit Facility
      8




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
    Senior Subordinated Notes
   Other
    9




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 4. Accrued Expenses
  October 3, 2009
    
    
    January 3, 2009Salaries, wages, commissions and bonuses
    
    $
    7,453
    
    
    $
    13,717Advertising
    
    
    4,582
    
    
    
    4,919Rebates
    
    
    5,058
    
    
    
    4,160Warranty
    
    
    3,488
    
    
    
    3,663Product liability  current portion
    
    
    4,161
    
    
    
    3,647Royalties
    
    
    1,528
    
    
    
    1,771Interest
    
    
    1,427
    
    
    
    6,335Income taxes
    
    
    3,549
    
    
    
    1,563Other
    
    
    14,782
    
    
    
    10,622Total accrued expenses
    
    $
    46,028
    
    
    $
    50,397
 5. Inventories
   October 3, 2009
    
    
    January 3, 2009Raw materials
    
    $
    18,007
    
    
    $
    17,083Work-in-process
    
    
    2,215
    
    
    
    2,567Finished goods
    
    
    108,212
    
    
    
    127,513Inventories, net
    
    $
    128,434
    
    
    $
    147,163
 6. Recent Accounting Pronouncements
 FASB Accounting Standards Codification FASB Accounting Standards
Codification
 SEC Update 
Amendments to Various Topics Containing SEC Staff Accounting Bulletins
 Fair Value
Measurements and Disclosures (Topic 820)  Measuring Liabilities at Fair Value
 10




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 7. Segment Reporting
   Team
    
    ActionFiscal Quarter Ended
    
    Sports
    
    Sports
    
    ConsolidatedOctober 3, 2009Net sales
    
    $
    91,186
    
    
    $
    89,235
    
    
    $
    180,421Segment income from operations
    
    
    11,831
    
    
    
    14,710
    
    
    
    26,541Depreciation
    
    
    2,396
    
    
    
    1,417
    
    
    
    3,813Capital expenditures
    
    
    2,316
    
    
    
    1,601
    
    
    
    3,917September 27, 2008Net sales
    
    $
    112,609
    
    
    $
    90,760
    
    
    $
    203,369Segment income from operations
    
    
    22,011
    
    
    
    11,041
    
    
    
    33,052Depreciation
    
    
    1,687
    
    
    
    1,416
    
    
    
    3,103Capital expenditures
    
    
    2,195
    
    
    
    2,047
    
    
    
    4,242
 Team
    
    ActionThree Fiscal Quarters Ended
    
    Sports
    
    Sports
    
    ConsolidatedOctober 3, 2009Net sales
    
    $
    299,818
    
    
    $
    252,749
    
    
    $
    552,567Segment income from operations
    
    
    38,846
    
    
    
    31,314
    
    
    
    70,160Depreciation
    
    
    6,662
    
    
    
    4,561
    
    
    
    11,223Capital expenditures
    
    
    6,938
    
    
    
    5,158
    
    
    
    12,096September 27, 2008Net sales
    
    $
    345,837
    
    
    $
    260,481
    
    
    $
    606,318Segment income from operations
    
    
    67,952
    
    
    
    27,775
    
    
    
    95,727Depreciation
    
    
    4,790
    
    
    
    4,223
    
    
    
    9,013Capital expenditures
    
    
    6,805
    
    
    
    4,150
    
    
    
    10,955
 Team
    
    ActionSports
    
    Sports
    
    ConsolidatedAssetsAs of October 3, 2009
    
    $
    597,426
    
    
    $
    373,044
    
    
    $
    970,470As of January 3, 2009
    
    
    609,793
    
    
    
    387,852
    
    
    
    997,645
  Fiscal Quarter Ended
    
    
    Three Fiscal Quarters EndedOctober 3, 2009
    
    
    September 27, 2008
    
    
    October 3, 2009
    
    
    September 27, 2008Segment income from operations
    
    $
    26,541
    
    
    $
    33,052
    
    
    $
    70,160
    
    
    $
    95,727Equity compensation expense
    
    
    (928
    )
    
    
    (1,101
    )
    
    
    (2,782
    )
    
    
    (2,944
    )Corporate expenses
    
    
    (4,096
    )
    
    
    (5,214
    )
    
    
    (14,445
    )
    
    
    (13,254
    )Restructuring and other infrequent expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (492
    )Amortization of intangibles
    
    
    (3,352
    )
    
    
    (3,352
    )
    
    
    (10,055
    )
    
    
    (10,055
    )Consolidated income from operations
    
    $
    18,165
    
    
    $
    23,385
    
    
    $
    42,878
    
    
    $
    68,982
 11




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 8. Product Liability, Litigation and Other Contingencies
 Product Liability
   Litigation and Other Contingencies
  9. Income Taxes
  10. Derivative Instruments and Hedging Activity
 Derivatives and Hedging
  12




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Fair Value Measurements and Disclosures
        October 3, 2009
    
    January 3, 2009Foreign
    
    
    
    
    
    ForeignU.S. Dollars
    
    Currency
    
    U.S. Dollars
    
    CurrencyForeign Currency Exchange Forward Contracts:U.S. Dollars / Canadian Dollars
    
    $
    40,370
    
    
    Cdn $
    43,781
    
    
    $
    21,950
    
    Cdn $
    26,575U.S. Dollars / Euros
    
    
    694
    
    
    
    475
    
    
    
    

    
    
    U.S. Dollars / British Pounds
    
    
    388
    
    
    £
    244
    
    

    
    
    
    £
    
   13




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
  Fair Value Measurements at Reporting Date UsingQuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:None
    
    $
    
    
    
    $
    
    
    
    $
    Liabilities:Interest rate swap
    
    $
    
    
    
    $
    7,599
    
    
    $
    Foreign currency exchange forward contracts
    
    
    
    
    
    
    1,525
    
    
    
    Total
    
    $
    
    
    
    $
    9,124
    
    
    $
    
 Fair Value of Financial Instruments
   October 3, 2009
    
    
    January 3, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial liabilities:Term loan facility
    
    $
    273,454
    
    
    $
    259,314
    
    
    $
    319,076
    
    
    $
    219,3158.375% senior subordinated notes
    
    
    140,112
    
    
    
    129,612
    
    
    
    143,044
    
    
    
    101,044
 11. Equity-Based Employee Compensation
  Compensation-Stock Compensation
 14




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
  Three Fiscal Quarters EndedSeptember 27, 2008Expected term
    
    
    4 yearsDividend yield
    
    
    0.0
    %Forfeiture rate
    
    
    7.7
    %Risk-free interest rate
    
    
    1.5 to 2.0
    %Expected volatility(1)
    
    
    39.0 to 46.0
    %
 
 (1)
    
    Expected volatility is based upon a peer group of companies given no historical data for the
Units.   Fiscal Quarter Ended
    
    
    Three Fiscal Quarters EndedOctober 3,
    
    
    September 27,
    
    
    October 3,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Equity compensation expense
    
    $
    928
    
    
    $
    1,101
    
    
    $
    2,782
    
    
    $
    2,944
  WeightedAverageNumber of
    
    Grant DateUnits
    
    Fair ValueOutstanding at January 3, 2009
    
    
    27,898,556
    
    
    $
    1.90Forfeited
    
    
    
    
    
    $
    Outstanding at April 4, 2009
    
    
    27,898,556
    
    
    $
    1.90Forfeited
    
    
    (210,000
    )
    
    $
    1.76Outstanding at July 4, 2009
    
    
    27,688,556
    
    
    $
    1.90Forfeited
    
    
    (424,018
    )
    
    $
    2.08Outstanding at October 3, 2009
    
    
    27,264,538
    
    
    $
    1.89Vested Units at October 3, 2009
    
    
    12,299,443
    
    
    $
    1.98
 12. Warranty Obligations
  15




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
  2009
    
    
    2008Beginning of fiscal year
    
    $
    3,663
    
    
    $
    3,390Warranty costs incurred during the period
    
    
    (991
    )
    
    
    (1,307
    )Warranty cost liability recorded during the period
    
    
    1,019
    
    
    
    1,425End of first fiscal quarter
    
    
    3,691
    
    
    
    3,508Warranty costs incurred during the period
    
    
    (1,301
    )
    
    
    (2,115
    )Warranty cost liability recorded during the period
    
    
    1,433
    
    
    
    2,357End of second fiscal quarter
    
    
    3,823
    
    
    
    3,750Warranty costs incurred during the period
    
    
    (1,261
    )
    
    
    (1,110
    )Warranty cost liability recorded during the period
    
    
    926
    
    
    
    1,212End of third fiscal quarter
    
    $
    3,488
    
    
    $
    3,852
 13. Related Party Transactions
 Easton Easton
     14. Subsequent Events
  16




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 15. Supplemental Guarantor Condensed Financial Information
   17




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Condensed Consolidating Balance Sheet
October 3, 2009
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    20,404
    
    
    $
    15,150
    
    
    $
    14,120
    
    
    $
    
    
    
    $
    49,674Accounts receivable, net
    
    
    
    
    
    
    177,038
    
    
    
    36,914
    
    
    
    
    
    
    
    213,952Inventories, net
    
    
    
    
    
    
    110,485
    
    
    
    17,949
    
    
    
    
    
    
    
    128,434Prepaid expenses
    
    
    530
    
    
    
    3,858
    
    
    
    528
    
    
    
    
    
    
    
    4,916Deferred taxes
    
    
    
    
    
    
    9,133
    
    
    
    
    
    
    
    
    
    
    
    9,133Other current assets
    
    
    
    
    
    
    7,432
    
    
    
    2,236
    
    
    
    
    
    
    
    9,668Total current assets
    
    
    20,934
    
    
    
    323,096
    
    
    
    71,747
    
    
    
    
    
    
    
    415,777Property, plant and equipment, net
    
    
    18,774
    
    
    
    27,151
    
    
    
    802
    
    
    
    
    
    
    
    46,727Deferred financing fees, net
    
    
    9,372
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,372Investments and intercompany receivables
    
    
    376,807
    
    
    
    98,551
    
    
    
    39,189
    
    
    
    (514,547
    )
    
    
    Intangible assets, net
    
    
    
    
    
    
    287,888
    
    
    
    5,875
    
    
    
    
    
    
    
    293,763Goodwill
    
    
    16,195
    
    
    
    182,155
    
    
    
    5,191
    
    
    
    
    
    
    
    203,541Other assets
    
    
    
    
    
    
    1,258
    
    
    
    32
    
    
    
    
    
    
    
    1,290Total assets
    
    $
    442,082
    
    
    $
    920,099
    
    
    $
    122,836
    
    
    $
    (514,547
    )
    
    $
    970,470LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    3,350
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,350Revolving credit facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Current portion of capital lease obligations
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Accounts payable
    
    
    
    
    
    
    60,750
    
    
    
    6,347
    
    
    
    
    
    
    
    67,097Accrued expenses
    
    
    3,280
    
    
    
    33,104
    
    
    
    9,644
    
    
    
    
    
    
    
    46,028Total current liabilities
    
    
    6,630
    
    
    
    93,875
    
    
    
    15,991
    
    
    
    
    
    
    
    116,496Long-term debt, less current portion
    
    
    408,792
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    408,792Capital lease obligations, less current portion
    
    
    
    
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    107Deferred taxes
    
    
    
    
    
    
    44,840
    
    
    
    
    
    
    
    
    
    
    
    44,840Other noncurrent liabilities
    
    
    
    
    
    
    15,483
    
    
    
    7,433
    
    
    
    
    
    
    
    22,916Long-term intercompany payables
    
    
    
    
    
    
    440,832
    
    
    
    36,804
    
    
    
    (477,636
    )
    
    
    Total liabilities
    
    
    415,422
    
    
    
    595,137
    
    
    
    60,228
    
    
    
    (477,636
    )
    
    
    593,151Total stockholders equity
    
    
    26,660
    
    
    
    324,962
    
    
    
    62,608
    
    
    
    (36,911
    )
    
    
    377,319Total liabilities and stockholders equity
    
    $
    442,082
    
    
    $
    920,099
    
    
    $
    122,836
    
    
    $
    (514,547
    )
    
    $
    970,470
 18




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Condensed Consolidating Balance Sheet
January 3, 2009
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    14,829
    
    
    $
    9,823
    
    
    $
    16,649
    
    
    $
    
    
    
    $
    41,301Accounts receivable, net
    
    
    
    
    
    
    190,615
    
    
    
    22,946
    
    
    
    
    
    
    
    213,561Inventories, net
    
    
    
    
    
    
    133,933
    
    
    
    13,230
    
    
    
    
    
    
    
    147,163Prepaid expenses
    
    
    1,246
    
    
    
    6,638
    
    
    
    299
    
    
    
    
    
    
    
    8,183Deferred taxes
    
    
    
    
    
    
    9,128
    
    
    
    
    
    
    
    
    
    
    
    9,128Other current assets
    
    
    
    
    
    
    7,492
    
    
    
    113
    
    
    
    
    
    
    
    7,605Total current assets
    
    
    16,075
    
    
    
    357,629
    
    
    
    53,237
    
    
    
    
    
    
    
    426,941Property, plant and equipment, net
    
    
    16,884
    
    
    
    28,105
    
    
    
    885
    
    
    
    
    
    
    
    45,874Deferred financing fees, net
    
    
    12,055
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,055Investments and intercompany receivables
    
    
    407,926
    
    
    
    97,353
    
    
    
    5,352
    
    
    
    (510,631
    )
    
    
    Intangible assets, net
    
    
    
    
    
    
    297,740
    
    
    
    6,078
    
    
    
    
    
    
    
    303,818Goodwill
    
    
    16,195
    
    
    
    182,070
    
    
    
    5,191
    
    
    
    
    
    
    
    203,456Other assets
    
    
    5,501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,501Total assets
    
    $
    474,636
    
    
    $
    962,897
    
    
    $
    70,743
    
    
    $
    (510,631
    )
    
    $
    997,645LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    12,405
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,405Current portion of capital lease obligations
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22Accounts payable
    
    
    
    
    
    
    76,438
    
    
    
    4,807
    
    
    
    
    
    
    
    81,245Accrued expenses
    
    
    3,118
    
    
    
    38,881
    
    
    
    8,398
    
    
    
    
    
    
    
    50,397Total current liabilities
    
    
    15,523
    
    
    
    115,341
    
    
    
    13,205
    
    
    
    
    
    
    
    144,069Long-term debt, less current portion
    
    
    443,383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    443,383Capital lease obligations, less current portion
    
    
    
    
    
    
    123
    
    
    
    
    
    
    
    
    
    
    
    123Deferred taxes
    
    
    
    
    
    
    39,794
    
    
    
    
    
    
    
    
    
    
    
    39,794Other noncurrent liabilities
    
    
    
    
    
    
    15,819
    
    
    
    7,433
    
    
    
    
    
    
    
    23,252Long-term intercompany payables
    
    
    
    
    
    
    477,636
    
    
    
    
    
    
    
    (477,636
    )
    
    
    Total liabilities
    
    
    458,906
    
    
    
    648,713
    
    
    
    20,638
    
    
    
    (477,636
    )
    
    
    650,621Total stockholders equity
    
    
    15,730
    
    
    
    314,184
    
    
    
    50,105
    
    
    
    (32,995
    )
    
    
    347,024Total liabilities and stockholders equity
    
    $
    474,636
    
    
    $
    962,897
    
    
    $
    70,743
    
    
    $
    (510,631
    )
    
    $
    997,645
 19




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Condensed Consolidating Statement of Operations
Fiscal Quarter Ended October 3, 2009
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    169,593
    
    
    $
    20,048
    
    
    $
    (9,220
    )
    
    $
    180,421Cost of sales
    
    
    
    
    
    
    110,274
    
    
    
    17,406
    
    
    
    (9,220
    )
    
    
    118,460Gross profit
    
    
    
    
    
    
    59,319
    
    
    
    2,642
    
    
    
    
    
    
    
    61,961Selling, general and administrative expenses
    
    
    6,311
    
    
    
    30,466
    
    
    
    3,667
    
    
    
    
    
    
    
    40,444Amortization of intangibles
    
    
    
    
    
    
    3,352
    
    
    
    
    
    
    
    
    
    
    
    3,352(Loss) income from operations
    
    
    (6,311
    )
    
    
    25,501
    
    
    
    (1,025
    )
    
    
    
    
    
    
    18,165Interest expense, net
    
    
    7,240
    
    
    
    316
    
    
    
    14
    
    
    
    
    
    
    
    7,570Share of net income (loss) of subsidiaries under equity method
    
    
    19,840
    
    
    
    (447
    )
    
    
    
    
    
    
    (19,393
    )
    
    
    Income (loss) before income taxes
    
    
    6,289
    
    
    
    24,738
    
    
    
    (1,039
    )
    
    
    (19,393
    )
    
    
    10,595Income tax expense (benefit)
    
    
    
    
    
    
    4,898
    
    
    
    (592
    )
    
    
    
    
    
    
    4,306Net income (loss)
    
    $
    6,289
    
    
    $
    19,840
    
    
    $
    (447
    )
    
    $
    (19,393
    )
    
    $
    6,289
 Condensed Consolidating Statement of Operations
Fiscal Quarter Ended September 27, 2008
 Non-Guarantor
    
    
    GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    184,944
    
    
    $
    31,308
    
    
    $
    (12,883
    )
    
    $
    203,369Cost of sales
    
    
    (16
    )
    
    
    118,162
    
    
    
    25,242
    
    
    
    (12,883
    )
    
    
    130,505Gross profit
    
    
    16
    
    
    
    66,782
    
    
    
    6,066
    
    
    
    
    
    
    
    72,864Selling, general and administrative expenses
    
    
    7,204
    
    
    
    35,897
    
    
    
    3,026
    
    
    
    
    
    
    
    46,127Amortization of intangibles
    
    
    
    
    
    
    3,352
    
    
    
    
    
    
    
    
    
    
    
    3,352(Loss) income from operations
    
    
    (7,188
    )
    
    
    27,533
    
    
    
    3,040
    
    
    
    
    
    
    
    23,385Interest expense, net
    
    
    9,287
    
    
    
    231
    
    
    
    (49
    )
    
    
    
    
    
    
    9,469Share of net income (loss) of subsidiaries under equity method
    
    
    22,818
    
    
    
    2,389
    
    
    
    
    
    
    
    (25,207
    )
    
    
    Income (loss) before income taxes
    
    
    6,343
    
    
    
    29,691
    
    
    
    3,089
    
    
    
    (25,207
    )
    
    
    13,916Income tax expense
    
    
    
    
    
    
    6,873
    
    
    
    700
    
    
    
    
    
    
    
    7,573Net income (loss)
    
    $
    6,343
    
    
    $
    22,818
    
    
    $
    2,389
    
    
    $
    (25,207
    )
    
    $
    6,343
 20




---



##### Table of Contents



EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and amounts in thousands, except as specified)
 Condensed Consolidating Statement of Operations
Three Fiscal Quarters Ended October 3, 2009
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    517,739
    
    
    $
    64,747
    
    
    $
    (29,919
    )
    
    $
    552,567Cost of sales
    
    
    
    
    
    
    348,325
    
    
    
    51,619
    
    
    
    (29,919
    )
    
    
    370,025Gross profit
    
    
    
    
    
    
    169,414
    
    
    
    13,128
    
    
    
    
    
    
    
    182,542Selling, general and administrative expenses
    
    
    20,613
    
    
    
    100,244
    
    
    
    8,752
    
    
    
    
    
    
    
    129,609Amortization of intangibles
    
    
    
    
    
    
    10,055
    
    
    
    
    
    
    
    
    
    
    
    10,055(Loss) income from operations
    
    
    (20,613
    )
    
    
    59,115
    
    
    
    4,376
    
    
    
    
    
    
    
    42,878Interest expense, net
    
    
    22,903
    
    
    
    719
    
    
    
    1
    
    
    
    
    
    
    
    23,623Share of net income (loss) of subsidiaries under equity method
    
    
    54,671
    
    
    
    3,284
    
    
    
    
    
    
    
    (57,955
    )
    
    
    Income (loss) before income taxes
    
    
    11,155
    
    
    
    61,680
    
    
    
    4,375
    
    
    
    (57,955
    )
    
    
    19,255Income tax expense
    
    
    
    
    
    
    7,009
    
    
    
    1,091
    
    
    
    
    
    
    
    8,100Net income (loss)
    
    $
    11,155
    
    
    $
    54,671
    
    
    $
    3,284
    
    
    $
    (57,955
    )
    
    $
    11,155
 Condensed Consolidating Statement of Operations
Three Fiscal Quarters Ended September 27, 2008
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    549,529
    
    
    $
    87,018
    
    
    $
    (30,229
    )
    
    $
    606,318Cost of sales
    
    
    
    
    
    
    357,823
    
    
    
    63,428
    
    
    
    (30,229
    )
    
    
    391,022Gross profit
    
    
    
    
    
    
    191,706
    
    
    
    23,590
    
    
    
    
    
    
    
    215,296Selling, general and administrative expenses
    
    
    19,034
    
    
    
    108,004
    
    
    
    8,729
    
    
    
    
    
    
    
    135,767Restructuring and other infrequent expenses
    
    
    
    
    
    
    492
    
    
    
    
    
    
    
    
    
    
    
    492Amortization of intangibles
    
    
    
    
    
    
    10,055
    
    
    
    
    
    
    
    
    
    
    
    10,055(Loss) income from operations
    
    
    (19,034
    )
    
    
    73,155
    
    
    
    14,861
    
    
    
    
    
    
    
    68,982Interest expense, net
    
    
    21,257
    
    
    
    603
    
    
    
    (224
    )
    
    
    
    
    
    
    21,636Share of net income (loss) of subsidiaries under equity method
    
    
    64,489
    
    
    
    10,736
    
    
    
    
    
    
    
    (75,225
    )
    
    
    Income (loss) before income taxes
    
    
    24,198
    
    
    
    83,288
    
    
    
    15,085
    
    
    
    (75,225
    )
    
    
    47,346Income tax expense
    
    
    
    
    
    
    18,799
    
    
    
    4,349
    
    
    
    
    
    
    
    23,148Net income (loss)
    
    $
    24,198
    
    
    $
    64,489
    
    
    $
    10,736
    
    
    $
    (75,225
    )
    
    $
    24,198
 21




---



##### 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 October 3, 2009
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    11,155
    
    
    $
    54,671
    
    
    $
    3,284
    
    
    $
    (57,955
    )
    
    $
    11,155Non-cash adjustments
    
    
    25,208
    
    
    
    (60,602
    )
    
    
    9,226
    
    
    
    57,955
    
    
    
    31,787Changes in operating assets and liabilities
    
    
    6,379
    
    
    
    16,721
    
    
    
    (14,461
    )
    
    
    
    
    
    
    8,639Net cash provided by (used in) operating activities
    
    
    42,742
    
    
    
    10,790
    
    
    
    (1,951
    )
    
    
    
    
    
    
    51,581Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (6,379
    )
    
    
    (5,446
    )
    
    
    (271
    )
    
    
    
    
    
    
    (12,096
    )Net cash used in investing activities
    
    
    (6,379
    )
    
    
    (5,446
    )
    
    
    (271
    )
    
    
    
    
    
    
    (12,096
    )Cash flows from financing activities:Payments on capital lease obligations
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    (17
    )Payments on senior term notes
    
    
    (43,646
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,646
    )Capital contribution from Parent
    
    
    12,858
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,858Net cash used in financing activities
    
    
    (30,788
    )
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    (30,805
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    (307
    )
    
    
    
    
    
    
    (307
    )Increase (decrease) in cash and cash equivalents
    
    
    5,575
    
    
    
    5,327
    
    
    
    (2,529
    )
    
    
    
    
    
    
    8,373Cash and cash equivalents, beginning of period
    
    
    14,829
    
    
    
    9,823
    
    
    
    16,649
    
    
    
    
    
    
    
    41,301Cash and cash equivalents, end of period
    
    $
    20,404
    
    
    $
    15,150
    
    
    $
    14,120
    
    
    $
    
    
    
    $
    49,674
 Condensed Consolidating Statement of Cash Flows
Three Fiscal Quarters Ended September 27, 2008
 Guarantor
    
    
    Non-GuarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    24,198
    
    
    $
    64,489
    
    
    $
    10,736
    
    
    $
    (75,225
    )
    
    $
    24,198Non-cash adjustments
    
    
    18,832
    
    
    
    (57,207
    )
    
    
    6,303
    
    
    
    75,225
    
    
    
    43,153Changes in operating assets and liabilities
    
    
    (2,928
    )
    
    
    10,848
    
    
    
    (13,611
    )
    
    
    
    
    
    
    (5,691
    )Net cash provided by operating activities
    
    
    40,102
    
    
    
    18,130
    
    
    
    3,428
    
    
    
    
    
    
    
    61,660Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (4,937
    )
    
    
    (6,004
    )
    
    
    (14
    )
    
    
    
    
    
    
    (10,955
    )Net cash used in investing activities
    
    
    (4,937
    )
    
    
    (6,004
    )
    
    
    (14
    )
    
    
    
    
    
    
    (10,955
    )Cash flows from financing activities:Payments on capital lease obligations
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    (16
    )Payments on senior term notes
    
    
    (2,512
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,512
    )Proceeds from senior secured credit facility, net
    
    
    24,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,500Net cash provided by (used in) financing activities
    
    
    21,988
    
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    21,972Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    (81
    )
    
    
    
    
    
    
    (81
    )Increase in cash and cash equivalents
    
    
    57,153
    
    
    
    12,110
    
    
    
    3,333
    
    
    
    
    
    
    
    72,596Cash and cash equivalents, beginning of period
    
    
    3,099
    
    
    
    1,820
    
    
    
    12,004
    
    
    
    
    
    
    
    16,923Cash and cash equivalents, end of period
    
    $
    60,252
    
    
    $
    13,930
    
    
    $
    15,337
    
    
    $
    
    
    
    $
    89,519
 22




---



##### 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 ®
    23




---



##### Table of Contents



How We Assess the Performance of Our Business
  Net Sales
 Bell , the Giro Easton
 Cost of Sales
  Gross Profit
  Selling, General and Administrative Expenses
  Factors Affecting our Business
  
    
    Economic Climate.The uncertain worldwide economic environment could cause the reported
financial information not to be necessarily indicative of future operating results or of
future financial condition. The current economic environment continues to affect our
business in a number of direct and indirect ways including: lower net sales from slowing
consumer demand for our products; tighter inventory management by retailers; reduced profit
margins due to pricing pressures and an unfavorable sales mix due to a higher concentration
of sales of mid to lower price point products; changes in currency exchange rates; lack of
credit availability, particularly for specialty retailers; and business disruptions due to
difficulties experienced by suppliers and customers.
 24




---



##### Table of Contents




    
    Retail Market Conditions.As a result of the slowing worldwide economic conditions, the
retail market for sports equipment has slowed and is extremely competitive, with strong
pressure from retailers for lower prices. We have experienced the effect of consumers
trading down price points and delaying certain discretionary purchases, which has resulted
in retailers reluctance to place orders for inventory in advance of selling seasons.
Further, institutional customers have reduced or deferred purchases due to budget
constraints. These trends may continue to have a negative impact on our businesses. We
continue to address the retail environment through our focus on innovation and product
development and emphasis on multiple price points.
    
    ERP Implementation.We continue to plan for our long-term growth by investing in our
operations management and infrastructure. In the second fiscal quarter of 2009, we
substantially completed the implementation of SAPs ERP system, an enterprise-wide software
platform encompassing finance, sales and distribution, manufacturing and materials
management. This program replaced multiple software platforms previously used in our
business operations, including legacy platforms used by our predecessor companies. We
expect that the system will streamline reporting and enhance internal
controls. We also expect
that this enterprise-wide software solution will enable management to better and more
efficiently conduct our operations and gather, analyze and assess information across all
business segments and geographic locations. However, we may experience difficulties in
operating our business under SAPs ERP, any of which could disrupt our operations, including
our ability to timely ship and track product orders to customers, project inventory
requirements, manage our supply chain and otherwise adequately
service our customers.
    
    Operations and Manufacturing.We intend to continue to streamline distribution,
logistics and manufacturing operations, bring uniform methodologies to inventory management,
optimize transportation, improve manufacturing efficiencies and provide a high level of
service to our customers. Over a several year period we have transitioned production of
certain products from our facilities to third party vendors in Asia and other cost efficient sources of labor. However, as a
result of our transition of the production of products from our own facilities to third
party suppliers, we may become more vulnerable to higher levels of
product defects, as well as, increased sourced product costs and our
ability to mitigate such cost increases may be reduced.
    
    Interest Expense and Debt Levels.In connection with our acquisition of Easton, we
entered into a senior secured credit facility providing for a $335.0 million term loan
facility, a $70.0 million U.S. revolving credit facility and a Cdn $12.0 million Canadian
revolving credit facility. As of October 3, 2009, the outstanding principal balance under
our term loan facility was $272.1 million and we had zero outstanding under both our U.S.
and Canadian revolving credit facilities. In addition, we have
$140.0 million of outstanding principal amount of our senior
subordinated notes due in 2012. As of July 4, 2009, we were not in compliance with the maximum total leverage
ratio test as set forth in the Credit Agreement. However, this event of non-compliance was
cured on August 14, 2009 through the exercise of a cure right as provided for in our the
credit agreement governing our senior secured credit facility as discussed in more detail in
the Liquidity and Capital Resources discussion below.
    
    Seasonality.Our business is subject to seasonal fluctuation. Sales of cycling products,
baseball and softball products and accessories occur primarily during the warm weather
months. Sales of football helmets, shoulder pads and reconditioning services are driven
primarily by football buying patterns, where orders begin at the end of the school football
season (December) and run through to the start of the next season (August). Shipments of
football products and performance of reconditioning services reach a low point during the
football season. Sales of ice hockey equipment are driven by ice hockey buying patterns with
orders shipping in late spring for fall play. Seasonal impacts are increasingly mitigated by
the rise in snow sports and powersports sales which, to a certain extent, counter the
cycling, baseball, softball and football seasons.
 Critical Accounting Policies and Estimates
  25




---



##### Table of Contents



RESULTS OF OPERATIONS
  Fiscal Quarter EndedOctober 3,
    
    
    % of
    
    
    September 27,
    
    
    % of2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales(Dollars in millions)Net sales
    
    $
    180.4
    
    
    
    100.0
    %
    
    $
    203.4
    
    
    
    100.0
    %Cost of sales
    
    
    118.4
    
    
    
    65.6
    %
    
    
    130.5
    
    
    
    64.2
    %Gross profit
    
    
    62.0
    
    
    
    34.4
    %
    
    
    72.9
    
    
    
    35.8
    %Selling, general and administrative expenses
    
    
    40.4
    
    
    
    22.4
    %
    
    
    46.1
    
    
    
    22.7
    %Amortization of intangibles
    
    
    3.4
    
    
    
    1.9
    %
    
    
    3.4
    
    
    
    1.6
    %Income from operations
    
    $
    18.2
    
    
    
    10.1
    %
    
    $
    23.4
    
    
    
    11.5
    %
 Three Fiscal Quarters EndedOctober 3,
    
    
    % of
    
    
    September 27,
    
    
    % of2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales(Dollars in millions)Net sales
    
    $
    552.5
    
    
    
    100.0
    %
    
    $
    606.3
    
    
    
    100.0
    %Cost of sales
    
    
    370.0
    
    
    
    67.0
    %
    
    
    391.0
    
    
    
    64.5
    %Gross profit
    
    
    182.5
    
    
    
    33.0
    %
    
    
    215.3
    
    
    
    35.5
    %Selling, general and administrative expenses
    
    
    129.6
    
    
    
    23.4
    %
    
    
    135.8
    
    
    
    22.4
    %Restructuring expenses
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.1
    %Amortization of intangibles
    
    
    10.0
    
    
    
    1.8
    %
    
    
    10.0
    
    
    
    1.6
    %Income from operations
    
    $
    42.9
    
    
    
    7.8
    %
    
    $
    69.0
    
    
    
    11.4
    %
 Net Sales
  Fiscal Quarter Ended
    
    
    Three Fiscal Quarters EndedOctober 3,
    
    
    September 27,
    
    
    Change
    
    
    October 3,
    
    
    September 27,
    
    
    Change2009
    
    
    2008
    
    
    $
    
    
    %
    
    
    2009
    
    
    2008
    
    
    $
    
    
    %(Dollars in millions)
    
    
    (Dollars in millions)Team Sports
    
    $
    91.2
    
    
    $
    112.6
    
    
    $
    (21.4
    )
    
    
    (19.0
    )%
    
    $
    299.8
    
    
    $
    345.8
    
    
    $
    (46.0
    )
    
    
    (13.3
    )%Action Sports
    
    
    89.2
    
    
    
    90.8
    
    
    
    (1.6
    )
    
    
    (1.8
    )%
    
    
    252.7
    
    
    
    260.5
    
    
    
    (7.8
    )
    
    
    (3.0
    )%$
    180.4
    
    
    $
    203.4
    
    
    $
    (23.0
    )
    
    
    (11.3
    )%
    
    $
    552.5
    
    
    $
    606.3
    
    
    $
    (53.8
    )
    
    
    (8.9
    )%
  Giro
 26




---



##### Table of Contents



Giro
 Cost of Sales
  Fiscal Quarter Ended
    
    
    Three Fiscal Quarters EndedOctober 3,
    
    
    % of
    
    
    September 27,
    
    
    % of
    
    
    October 3,
    
    
    % of
    
    
    September 27,
    
    
    % of2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales
    
    
    2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales(Dollars in millions)
    
    
    (Dollars in millions)Team Sports
    
    $
    56.0
    
    
    
    61.4
    %
    
    $
    65.7
    
    
    
    58.3
    %
    
    $
    187.7
    
    
    
    62.6
    %
    
    $
    204.6
    
    
    
    59.2
    %Action Sports
    
    
    62.4
    
    
    
    70.0
    %
    
    
    64.8
    
    
    
    71.4
    %
    
    
    182.3
    
    
    
    72.1
    %
    
    
    186.4
    
    
    
    71.6
    %$
    118.4
    
    
    
    65.6
    %
    
    $
    130.5
    
    
    
    64.2
    %
    
    $
    370.0
    
    
    
    67.0
    %
    
    $
    391.0
    
    
    
    64.5
    %
   Gross Profit
  Fiscal Quarter Ended
    
    
    Three Fiscal Quarters EndedOctober 3,
    
    
    % of
    
    
    September 27,
    
    
    % of
    
    
    October 3,
    
    
    % of
    
    
    September 27,
    
    
    % of2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales
    
    
    2009
    
    
    Net Sales
    
    
    2008
    
    
    Net Sales(Dollars in millions)
    
    
    (Dollars in millions)Team Sports
    
    $
    35.2
    
    
    
    38.6
    %
    
    $
    46.9
    
    
    
    41.7
    %
    
    $
    112.1
    
    
    
    37.4
    %
    
    $
    141.3
    
    
    
    40.8
    %Action Sports
    
    
    26.8
    
    
    
    30.0
    %
    
    
    26.0
    
    
    
    28.6
    %
    
    
    70.4
    
    
    
    27.9
    %
    
    
    74.0
    
    
    
    28.4
    %$
    62.0
    
    
    
    34.4
    %
    
    $
    72.9
    
    
    
    35.8
    %
    
    $
    182.5
    
    
    
    33.0
    %
    
    $
    215.3
    
    
    
    35.5
    %
   27




---



##### Table of Contents



Selling, General and Administrative Expenses
  True Fit
 Restructuring Expenses
  Amortization of Intangibles
  Interest Expense
  Income Tax Expense
   28




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   Senior Secured Credit Facility
     29




---



##### Table of Contents



Senior Subordinated Notes
   30




---



##### Table of Contents



Sources
and Uses of Our Cash
     
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Risk
   
 31




---



##### Table of Contents



Interest Rate Risk
   
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  32




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 6. Exhibits
  The filings referenced forExhibit
    
    
    
    incorporation by referenceNumber
    
    Description of Exhibit
    
    are:31.1
    
    Certification of the Principal
Executive Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Filed herewith31.2
    
    Certification of the Principal
Financial Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Filed herewith32.1
    
    Certification of the Principal
Executive Officer and Principal
Financial Officer pursuant to
the 18 U.S.C. Section 1350, as
adopted pursuant to Section 906
of the Sarbanes-Oxley Act of
2002
    
    Filed herewith
 33




---



##### Table of Contents



SIGNATURES
  EASTON-BELL SPORTS, INC.
RegistrantDated: November 4, 2009
    /s/ Paul E. HarringtonPaul E. HarringtonChief Executive Officer and President
(Principal Executive Officer)Dated: November 4, 2009
    /s/ Mark A. TrippMark A. TrippChief Financial Officer
(Principal Financial Officer) 34