<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q


(Mark One)
[x]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996

                                       or

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         AND EXCHANGE ACT OF 1934 For the transition period from        to

                         Commission File Number 0-26742

                                GT BICYCLES, INC.
           (Exact name of the registrant as specified in its charter)


          Delaware                                              04-3210830
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)


            3100 West Segerstrom Avenue, Santa Ana, California 92704
                    (Address of principal executive offices)

                                 (714) 513-7100
              (Registrant's telephone number, including area code)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                 Not Applicable

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                    Common Stock, par value $0.001 per share

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No
                                              ---     ---

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.

<TABLE>
<CAPTION>
             Class                              Outstanding at November 11, 1996
             -----                              --------------------------------
<S>                                             <C>
Common Stock, $0.001 par value                               9,778,597
</TABLE>
<PAGE>   2
                                GT BICYCLES, INC.

           INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
Part I.  Financial Information                                                          Page Number
<S>                                                                                     <C>
         Item 1.  Condensed Consolidated Financial Statements

                  Condensed Consolidated Balance Sheets as of September 30, 1996
                         and December 31, 1995                                                    3

                  Condensed Consolidated Statements of Operations for the three
                         and nine months ended September 30, 1996 and 1995                        4

                  Condensed Consolidated Statements of Cash Flows for the
                         nine months ended September 30, 1996 and 1995                            5

                  Notes to Condensed Consolidated Financial Statements                            7

         Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                                      11

Part II. Other Information

         Item 6.  Exhibits and Reports on Form 8-K                                               16

Signatures                                                                                       17
</TABLE>


                                       2
<PAGE>   3
                               GT BICYCLES, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>

                                                                               September 30,     December 31,
                                                                                   1996              1995
                                                                               -------------     ------------
ASSETS (note 4)                                                                         (in thousands)
<S>                                                                           <C>                <C>
Current assets:
       Cash and cash equivalents                                                  $  1,071        $    --
       Trade accounts receivable, net                                               40,042         34,722
       Inventories (note 2)                                                         66,257         44,336
       Income taxes receivable                                                          --          1,065
       Deferred income taxes                                                         1,558          1,558
       Prepaid expenses and other assets                                             1,621            832
                                                                                  --------        -------
           Total current assets                                                    110,549         82,513

Property, plant and equipment, net                                                   4,801          2,841
Goodwill and covenants not to compete, net                                          20,169         10,012
Other assets                                                                         1,782          1,327
                                                                                  --------        -------

                                                                                  $137,301        $96,693
                                                                                  ========        =======
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
       Current portion of long-term debt (note 4)                                 $  4,250        $    --
       Current portion of capital lease obligations                                    342            172
       Accounts payable                                                              9,965          5,647
       Accrued liabilities                                                           6,868          3,905
       Income taxes payable                                                            156             --
                                                                                  --------        -------
           Total current liabilities                                                21,581          9,724
       Long-term debt, net of current portion (note 4)                              60,239         39,610
       Capital lease obligations, net of current portion                               693            647
                                                                                  --------        -------
           Total liabilities                                                        82,513         49,981

Stockholders' equity:
       Preferred stock, $0.001 par value, 5,000,000 shares authorized, none
           issued                                                                       --             --
       Common stock, $0.001 par value, 20,000,000 shares authorized,
           9,775,356 and 9,764,586 shares issued and outstanding at
           September 30, 1996 and December 31, 1995, respectively                       10             10
       Additional paid-in-capital                                                   46,855         46,820
       Retained earnings (accumulated deficit)                                       7,937           (118)
       Cumulative translation loss                                                     (14)            --
                                                                                  --------        -------
           Total stockholders' equity                                               54,788         46,712
                                                                                  --------        -------

                                                                                  $137,301        $96,693
                                                                                  ========        =======
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>   4
                               GT BICYCLES, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                     Three Months Ended             Nine Months Ended
                                                        September 30,                 September 30,
                                                   ---------------------         ------------------------
                                                     1996           1995           1996            1995
                                                   -------        -------        --------        --------
                                                            (in thousands, except per share data)
<S>                                                <C>            <C>            <C>             <C>
Net sales                                          $52,435        $38,295        $145,399        $120,011
Cost of sales                                       37,041         27,604         104,272          88,791
                                                   -------        -------        --------        --------

       Gross profit                                 15,394         10,691          41,127          31,220

Selling, general and administrative expenses        10,645          7,701          27,281          20,802
Amortization of intangibles and deferred
   financing costs                                     243            942             514           3,008
                                                   -------        -------        --------        --------

Operating income                                     4,506          2,048          13,332           7,410

Life insurance proceeds, net of guaranteed
   severance payments (note 5)                       1,276             --           1,276              --
Interest expense                                    (1,047)        (1,628)         (2,514)         (5,151)
                                                   -------        -------        --------        --------

Income before taxes                                  4,735            420          12,094           2,259

Income tax expense                                  (1,095)          (186)         (4,039)         (1,001)
                                                   -------        -------        --------        --------

Net income                                         $ 3,640        $   234        $  8,055        $  1,258
                                                   =======        =======        ========        ========

Net income per common and common
   equivalent share                                $  0.37        $  0.03        $   0.81        $   0.18
                                                   =======        =======        ========        ========

Weighted average common and
   common equivalent shares                          9,934          7,086           9,924           7,086
                                                   =======        =======        ========        ========
</TABLE>


See accompanying notes to condensed consolidated financial statements.




                                       4
<PAGE>   5
                               GT BICYCLES, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   Nine Months Ended
                                                                                      September 30,
                                                                                ------------------------
                                                                                  1996            1995
                                                                                --------        --------
                                                                                     (in thousands)
<S>                                                                             <C>             <C>
Cash flows from operating activities:
    Net income                                                                  $  8,055        $  1,258
    Adjustments to reconcile net income to net
        cash (used in) provided by operating activities:
        Depreciation and amortization                                              1,190           3,721
        Provisions for discounts and losses on accounts receivable                   187             184
        Accumulated foreign currency translation adjustments                         (14)             --
    Changes in assets and liabilities:
        Trade accounts receivable                                                    797            (476)
        Inventories                                                              (12,127)          2,133
        Income taxes                                                                 871              32
        Prepaid expenses and other assets                                         (1,010)           (190)
        Accounts payable                                                          (2,068)         (1,415)
        Accrued liabilities                                                        2,560            (820)
                                                                                --------        --------
            Net cash (used in) provided by operating activities                   (1,559)          4,427

Cash flows from investing activities:
    Purchases of property, plant and equipment                                    (2,205)           (605)
    Purchase of Riteway Products North Central, Inc.                                  --          (3,267)
    Purchase of Caratti Sport Limited                                            (14,225)             --
                                                                                --------        --------
            Net cash used in investing activities                                (16,430)         (3,872)

Cash flows from financing activities:
    Net borrowings under line of credit                                            1,991            (500)
    Borrowings from term loan                                                     17,000              --
    Principal payments on capital lease obligations                                 (110)           (128)
    Borrowings for capital lease obligations                                         144              --
    Proceeds from shares issued for employee stock purchase plan                      20              --
    Proceeds from exercise of stock options                                           15              --
                                                                                --------        --------
            Net cash provided by (used in) financing activities                   19,060            (628)

Change in cash and cash equivalents                                                1,071             (73)
Cash and cash equivalents at beginning of period                                      --              73
                                                                                --------        --------
Cash and cash equivalents at end of period                                      $  1,071        $     --
                                                                                ========        ========

Supplemental disclosure of cash flow information:
    Cash paid during the period for:

        Interest                                                                $  2,460        $  4,798
                                                                                ========        ========

        Income taxes                                                            $  2,604        $    969
                                                                                ========        ========
                                                                                      (Continued)
</TABLE>



                                       5
<PAGE>   6
                               GT BICYCLES, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                             Nine Months Ended
                                                                September 30,
                                                           ---------------------
                                                            1996           1995
                                                           -------        ------
                                                               (in thousands)
<S>                                                       <C>             <C>
Supplemental disclosures:
    Purchase of Riteway Products North Central, Inc.
        Inventory                                               --         2,217
        Property, plant and equipment                           --            50
        Goodwill                                                --           350
        Covenant not to compete                                 --           650
                                                           -------        ------
          Net cash used to acquire business                $    --        $3,267
                                                           =======        ======
    Purchase of Caratti Sport Limited
        Working capital, other than cash                     9,194            --
        Property, plant and equipment                          433            --
        Goodwill                                            10,669
        Long-term debt                                      (5,888)           --
        Noncurrent liabilities                                (183)           --
                                                           -------        ------
          Net cash used to acquire business                $14,225        $   --
                                                           =======        ======
</TABLE>





See accompanying notes to condensed consolidated financial statements.






                                       6
<PAGE>   7
                                GT BICYCLES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements of GT Bicycles, Inc. (the
"Company") include the wholly-owned subsidiaries, GT Bicycles California, Inc.,
GT BMX Products, Inc., Riteway Distributors, Inc., Riteway Distributors Central,
Inc., Riteway Products East, Inc., Riteway Products North Central, Inc., Riteway
Products Japan K.K. ("Riteway Japan"), Riteway Products France S.A.R.L.
("Riteway France") and Caratti Sport Limited ("Caratti"). Riteway Products North
Central, Inc., Riteway France and Caratti were acquired in July 1995, April 1996
and July 1996, respectively, and have been accounted for under the purchase
method of accounting and, accordingly, have been included in the Company's
consolidated results of operations since the date of acquisition. Riteway Japan
was formed in March 1996 as a wholly-owned subsidiary of the Company. All
significant intercompany balances and transactions have been eliminated in
consolidation.

Foreign Currency Translation

The Company uses the local currency as the functional currency for its overseas
operations. Accordingly, assets and liabilities outside the United States were
translated into dollars at the rate of exchange in effect at the balance sheet
date. Income and expense items were translated at the weighted average exchange
rates prevailing during the period. The cumulative translation gain or loss is
included as an adjustment to stockholders' equity. There were no significant
foreign currency transaction gains or losses in the periods presented.

Unaudited Condensed Consolidated Financial Statements

The unaudited condensed consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and include all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All such
adjustments are, in the opinion of management, of a normal recurring nature.
Results for the three and nine month periods ended September 30, 1996 are not
necessarily indicative of the operating results to be expected for the full
year.

(2)  INVENTORIES

A summary of the components of inventories follows:

<TABLE>
<CAPTION>
                                                     September 30,    December 31,
                                                         1996            1995
                                                     ------------     -----------
                                                            (in thousands)
<S>                                                  <C>              <C>
Raw materials                                          $   123           $   328
Work in process                                          4,798             1,437
Finished goods and component parts                      61,336            42,571
                                                       -------           -------
                                                       $66,257           $44,336
                                                       =======           =======
</TABLE>

(3)  NET INCOME PER SHARE

The calculation of net income per share was determined by dividing net income by
the weighted average common and common equivalent shares outstanding when
dilutive. In accordance with the Securities and Exchange Commission Staff
Accounting Bulletin No. 83, shares issued and share options granted within one
year of the Company's initial public offering ("IPO") have been included in the
calculation of common share equivalents, using the treasury stock method to
determine the dilutive effect of the issuances, as if they were outstanding for
all periods presented even if they were antidilutive. The calculation of common
share equivalents assumes that the


                                       7
<PAGE>   8
                                GT BICYCLES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


proceeds of common shares and share options within one year of the IPO were used
to repurchase common shares at the IPO price of $14.00 per share. Primary
earnings per share approximates fully diluted earnings per share for all periods
presented.


(4)  DEBT

Debt is comprised of the following:

<TABLE>
<CAPTION>
                                               September 30,     December 31,
                                                   1996              1995
                                               -------------     ------------
                                                         (in thousands)
<S>                                            <C>               <C>
Domestic revolving credit facility,
secured by the assets of the
Company, due June 30, 1998.
Interest is payable monthly at
various interest rates described
below (weighted average rate of
6.62% at September 30, 1996).                     $39,415          $39,610

Domestic term loan, secured by the
assets of the Company, due
September 30, 2000. Interest is
payable monthly at various interest
rates described below (weighted
average rate of 7.54% at September
30, 1996).                                         17,000               --

Riteway Japan revolving credit
facility, secured by the assets of
the Company, due June 30, 1998.
Interest is payable monthly at rate
described below (weighted average
rate of 2.01% at September 30,
1996).                                             1,395                --

Riteway France revolving credit
facility, secured by the assets of
the Company, due June 30, 1998.
Interest is payable monthly at rate
described below (weighted average
rate of 4.44% at September 30,
1996).                                             2,179                --

Caratti multicurrency revolving
credit facility, secured by the
assets of Caratti, due June 30,
1998. Interest is payable monthly
at rate described below (weighted
average rate of 7.38% at September
30, 1996).                                         4,500                --
                                                 -------           -------
                                                  64,489            39,610
Less current portion of domestic
term loan                                         (4,250)               --
                                                 -------           -------
                                                 $60,239           $39,610
                                                 =======           =======
</TABLE>


In November 1995, the Company entered into a domestic credit facility, as
amended in August 1996, with a bank that provides for a domestic revolving
credit facility and a domestic term loan. The Company also entered into separate
credit agreements with the same bank to provide separate credit facilities to
Riteway Japan, Riteway France and Caratti.

The domestic credit facility requires the Company to maintain certain financial
ratios and other covenants, which, among other things, restrict other
indebtedness, capital expenditures and certain investments. The Company was in
compliance with all such requirements and covenants at September 30, 1996.


                                       8
<PAGE>   9
                                GT BICYCLES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Domestic Revolving Credit Facility

The total amount of the credit available under the domestic revolving credit
facility component of the domestic credit facility for advances and letters of
credit is limited to the lesser of $60,000,000 or the Company's borrowing base
associated with accounts receivable and inventories, as defined by the
agreement, plus an additional $5,000,000 available from January 1 through April
30, $6,000,000 available from August 1 through October 31, and $3,000,000
available from November 1 through November 30 of each year. Subsequent to
September 30, 1996, the $3,000,000 additional borrowing base available from
November 1 through November 30 was increased to $8,000,000 and expanded for the
period from November 1 through December 31 of each year. The borrowing base or
credit limit is reduced each month by $2,000,000 each for Riteway Japan and
Riteway France which represents the credit extended by the bank to these
locations. Subsequent to September 30, 1996, the credit extended to Riteway
Japan and Riteway France was increased to $2,500,000 and $3,500,000,
respectively. The amount individually available under the commercial and standby
letters of credit is $15,000,000. The Company has the option to pay interest on
borrowings under the domestic revolving credit facility at the bank's Reference
Rate (as defined by the agreement), the LIBOR Rate plus the applicable margin
(as defined by the agreement), the Offshore Rate plus the applicable margin (as
defined by the agreement), or, until March 31, 1997 only, the CD Rate plus the
applicable margin (as defined by the agreement), or a combination thereof. The
Company must pay a commitment fee on a quarterly basis equal to .25% (per annum)
of the unused amount of the credit up to $50,000,000. At September 30, 1996, the
Company had no commercial or standby letters of credit outstanding.

Domestic Term Loan

The domestic term loan component of the domestic credit facility of $17,000,000
is payable in equal quarterly installments commencing December 31, 1996 and
matures on September 30, 2000. The domestic term loan is made up of two
disbursements: 1) $14,000,000 for the purchase of Caratti, and 2) $3,000,000 for
the repayment of Caratti's prior bank debt. The Company has the option to pay
interest on borrowings under the domestic term loan at the bank's Reference Rate
(as defined by the agreement), the LIBOR Rate plus 1.85% (as defined by the
agreement), the Offshore Rate plus 1.85% (as defined by the agreement), or a
combination thereof.

Riteway Japan Credit Facility

The Riteway Japan credit facility consists of a $2,000,000 revolving credit
facility which was increased to $2,500,000 subsequent to September 30, 1996.
Interest on borrowings under the revolving credit facility is payable monthly at
the bank's base rate plus 1.25%.

Riteway France Credit Facility

The Riteway France credit facility consists of a $2,000,000 revolving credit
facility which was increased to $3,500,000 subsequent to September 30, 1996.
Interest on borrowings under the revolving credit facility is payable monthly at
the bank's base rate plus 1.00%.

Caratti Credit Facility

The Caratti credit facility consists of a multicurrency revolving credit
facility, a multicurrency overdraft facility and a multicurrency facility for
the issuance of irrevocable commercial letters of credit in an aggregate amount
equal to the lesser of $5,000,000 (or its equivalent from time to time in
optional currencies, as defined by the agreement) or Caratti's borrowing base
associated with accounts receivable and inventories, as defined by the
agreement. The amount individually available under the irrevocable commercial
letters of credit is $1,500,000 (or its equivalent from time to time in optional
currencies, as defined by the agreement). The overdraft facility is repayable on
demand by the bank. Interest on borrowings under the multicurrency revolving
credit facility is payable monthly at the sum of the MLA Cost (as defined by the
agreement), a margin of 1.25% and LIBOR (as



                                       9
<PAGE>   10
                                GT BICYCLES, INC.
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


defined by the agreement). Interest on the multicurrency overdraft facility is
payable monthly at the bank's prevailing base rate plus 1.25%. Caratti must pay
a commitment fee on a quarterly basis equal to .25% (per annum) of the unused
amount of the credit up to $5,000,000. At September 30, 1996, the Company had no
commercial letters of credit outstanding.

(5)  LIFE INSURANCE PROCEEDS, NET OF GUARANTEED SEVERANCE PAYMENTS

Included in net income for the three and nine months ended September 30, 1996,
were net life insurance proceeds of $1,276,000 that the Company received
following the death of former President and Chief Executive Officer, Richard
Long, in July 1996. The net proceeds consisted of a $2,000,000 insurance
settlement less guaranteed payments owed to Richard Long's family of $724,000

(6)  ACQUISITION OF CARATTI

On July 3, 1996, the Company purchased the stock of United Kingdom-based Caratti
for approximately $13,125,000. As part of the purchase, the Company agreed to
pay a contingent amount of up to an additional aggregate amount of approximately
$1,100,000 based on Caratti's future operating results. Caratti is involved in
the business of distributing wholesale and retail bicycles, parts and
accessories. The purchase of Caratti by the Company was primarily funded through
a $14,000,000 overadvance credit added to the Company's domestic revolving
credit facility. On August 14, 1996, the $14,000,000 overadvance credit was
rolled over into the domestic term loan (see note 4). The Company intends to
continue substantially the same use of the assets acquired from Caratti. The
cost of the acquisition has been preliminarily allocated on the basis of the
estimated fair value of the assets acquired and liabilities assumed.



                                       10
<PAGE>   11
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

GENERAL

GT Bicycles, Inc. (the "Company") is a leading designer, manufacturer and
marketer of mid-to premium-priced mountain and juvenile BMX bicycles sold under
the Company's brand names. The Company's Riteway Products and Caratti
distribution network is a leading distributor of the Company's bicycles, parts
and accessories, as well as parts and accessories of other manufacturers, to
independent bicycle dealers.

RESULTS OF OPERATIONS

Net sales were $52.4 million and $145.4 million, respectively, for the three and
nine months ended September 30, 1996, compared to $38.3 million and $120.0
million, respectively, for the corresponding periods in 1995, representing
increases of 36.9% and 21.2% over the prior year comparable periods. The
increases in net sales were attributable to higher sales in all product line
categories. Bicycle sales were $35.9 million and $100.1 million, respectively,
for the three and nine months ended September 30, 1996 compared to $26.0 million
and $86.5 million for the corresponding periods in 1995. Parts and accessory
sales were $16.5 million and $45.3 million, respectively, for the three and nine
months ended September 30, 1996 compared to $12.3 million and $33.5 million,
respectively, for the corresponding periods in 1995. International sales for the
three and nine months ended September 30, 1996 represented 32.2% and 28.7% of
net sales, respectively, compared to 18.0% and 22.4% for the same periods in the
prior year. The increase in international sales which consists of increased
sales of adult bikes and parts and accessory sales is primarily attributable to
the addition of the new foreign subsidiaries in fiscal 1996.

Gross profit margins in the three and nine months ended September 30, 1996 were
29.4% and 28.3%, respectively, compared to 27.9% and 26.0%, respectively, for
the comparable periods in 1995. The increases were attributable to higher gross
profit margins in all bicycle product categories from improved manufacturing
efficiencies and sourcing.

Selling, general and administrative expenses for the three months ended
September 30, 1996 increased to $10.6 million from $7.7 million in the
corresponding period of 1995, but remained relatively flat as a percentage of
sales. For the nine months ended September 30, 1996, such expenses increased to
$27.3 million, or 18.8% of net sales, from $20.8 million, or 17.3% of net sales,
in the comparable period of 1995. The increases in expenses were primarily due
to increased administrative costs for the new foreign subsidiaries as well as
additional personnel costs and associated overhead to support the increased
revenues of the Company.

Amortization of intangibles and deferred financing costs decreased by $0.7
million to $0.2 million for the three months ended September 30, 1996 compared
to the corresponding period of 1995 and decreased as a percentage of net sales
from 2.5% to 0.5%. For the nine months ended September 30, 1996, the
amortization charges decreased by $2.5 million to $0.5 million compared to the
corresponding period of 1995 and decreased as a percentage of net sales from
2.5% to 0.4%. Effective upon the closing of the Company's initial public
offering in October 1995, the Company and the individuals subject to certain
covenants not to compete terminated the covenants not to compete. In addition,
the Company prepaid a senior term loan and senior subordinated debenture from
the net proceeds of the initial public offering. As a result, the Company's
amortization expense related to these covenants not to compete and the deferred
financing costs associated with the senior term loan was terminated as of
October 1995.



                                       11
<PAGE>   12
Life insurance proceeds, net of guaranteed severance payments increased to $1.3
million in both the three and nine months ended September 30, 1996. Following
the death of former President and Chief Executive Officer, Richard Long, in July
1996, the Company received a $2.0 million life insurance settlement. This
settlement is shown net of guaranteed payments owed to Richard Long's family of
$0.7 million.

Operating income for the three months ended September 30, 1996 increased to $4.5
million, or 8.6% of net sales, from $2.0 million, or 5.3% of net sales, in the
corresponding period of 1995. For the nine months ended September 30, 1996,
operating income increased to $13.3 million, or 9.2% of net sales, from $7.4
million, or 6.2% of net sales, in the comparable period of 1995. The increases
were largely the result of the reduction of amortization of intangibles and
deferred financing costs referenced above, but to a lesser extent are
attributable to improved gross profit margins as discussed above.

Interest expense was $1.0 million and $2.5 million, respectively, for the three
and nine months ended September 30, 1996 compared to $1.6 million and $5.2
million, respectively, for the corresponding periods in 1995, representing
decreases of 35.7% and 51.2% over the prior year comparable periods. The
decreases were due to the reduction in debt as well as decreased short-term
interest rates under the Company's new revolving credit facility, obtained in
November 1995, which has been partially offset by increased interest expense on
additional borrowings for acquisitions and foreign operations.

The effective tax rate for income tax expense was 23.1% and 33.4% for the three
and nine months ended September 30, 1996, respectively, as compared to 44.3% for
both the three and nine months ended September 30, 1995. The Company's effective
tax rate has been affected by the nontaxable life insurance proceeds of $2.0
million received in the third quarter of 1996 and the non-deductibility of the
amortization of goodwill.

LIQUIDITY AND CAPITAL RESOURCES

The Company finances its operating cash needs primarily from bank and vendor
credit and cash generated from operations. In November 1995, the Company entered
into a domestic credit facility, as amended in August 1996, with a bank that
provides for a domestic revolving credit facility and a domestic term loan. The
Company also entered into separate credit agreements with the same bank to
provide separate revolving credit facilities to Riteway Products Japan K.K.
("Riteway Japan"), Riteway Products France S.A.R.L. ("Riteway France") and
Caratti Sport Limited ("Caratti").

The total amount of the credit available under the domestic revolving credit
facility component of the domestic credit facility for advances and letters of
credit is limited to the lesser of $60.0 million or the Company's borrowing base
associated with accounts receivable and inventories, as defined by the
agreement, plus an additional $5.0 million available from January 1 through
April 30, $6.0 million available from August 1 through October 31, and $3.0
million available from November 1 through November 30 of each year. Subsequent
to September 30, 1996, the $3,000,000 additional borrowing base available from
November 1 through November 30 was increased to $8,000,000 and expanded for the
period from November 1 through December 31 of each year. The borrowing base or
credit limit is reduced each month by $2.0 million each for Riteway Japan and
Riteway France which represents the credit extended by the bank to these
locations. Subsequent to September 30, 1996, the credit extended to Riteway
Japan and Riteway France was increased to $2.5 million and $3.5 million,
respectively. At September 30, 1996, the Company had $39.4 million outstanding
under the domestic revolving credit facility which incurs interest at the bank's
Reference Rate (as defined by the agreement) or other miscellaneous rates. The
domestic revolving credit facility matures on June 30, 1998.

The domestic term loan component of the domestic credit facility obtained in
August 1996 for $17.0 million is payable in equal quarterly installments
commencing December 31, 1996 and matures on September 30, 2000. The domestic
term loan is made up of two disbursements: 1) $14.0 million for the purchase of
Caratti, and 2) $3.0 million for the repayment of Caratti's prior bank debt. At
September 30,



                                       12
<PAGE>   13
1996, the Company had $17.0 million outstanding under the domestic term loan
which incurs interest at the bank's Reference Rate (as defined by the agreement)
or other miscellaneous rates.

The Riteway Japan credit facility consists of a $2,000,000 revolving credit
facility which was increased to $2,500,000 subsequent to September 30, 1996 with
interest on borrowings payable monthly at the bank's base rate plus 1.25%. The
Riteway France credit facility consists of a $2,000,000 revolving credit
facility which was increased to $3,500,000 subsequent to September 30, 1996 with
interest on borrowings payable monthly at the bank's base rate plus 1.00%. The
Caratti credit facility consists of a multicurrency revolving credit facility, a
multicurrency overdraft facility and a multicurrency facility for the issuance
of irrevocable commercial letters of credit in an aggregate amount equal to the
lesser of $5,000,000 (or its equivalent from time to time in optional
currencies, as defined by the agreement) or Caratti's borrowing base associated
with accounts receivable and inventories, as defined by the agreement. The
amount individually available under the irrevocable commercial letters of credit
is $1,500,000 (or its equivalent from time to time in optional currencies, as
defined by the agreement). The overdraft facility is repayable on demand by the
bank. Interest on borrowings under the multicurrency revolving credit facility
is payable monthly at the sum of the MLA Cost (as defined by the agreement), a
margin of 1.25% and LIBOR (as defined by the agreement). Interest on the
multicurrency overdraft facility is payable monthly at the bank's prevailing
base rate plus 1.25%. The Riteway Japan, Riteway France and Caratti credit
facilities mature on June 30, 1998.

For the first nine months of 1996, the Company had negative cash flow from
operations of $1.6 million compared to a positive cash flow from operations of
$4.4 million in the same period of 1995. The decrease was primarily attributable
to increased inventories, excluding the inventory acquired in connection with
the acquisition of Caratti. In July 1996, the Company obtained an overadvance
credit of approximately $14.0 million on its domestic revolving credit facility
that was used to purchase Caratti. In August 1996, the $14.0 million overadvance
credit was rolled over into the domestic term loan. The Company invested $2.2
million for additional property and equipment in the first nine months of 1996,
excluding the property and equipment acquired in connection with the acquisition
of Caratti.

The Company anticipates that it will continue to rely on bank and vendor credit
and cash generated from operations in order to finance anticipated higher
inventory and accounts receivable levels. The Company believes that cash from
operations, its bank and vendor credit and its existing working capital will be
sufficient to satisfy the Company's anticipated working capital and capital
expenditure requirements at least through the next 12 months. Nonetheless, the
Company may seek additional sources of capital as necessary or appropriate to
finance acquisitions or otherwise finance the Company's operations. There can be
no assurance, however, that such funds, if needed, will be available.

CERTAIN FACTORS THAT MAY AFFECT THE COMPANY'S BUSINESS AND FUTURE RESULTS

ECONOMIC CONDITIONS; SUSTAINABILITY OF GROWTH. The Company's business is subject
to economic cycles and changing consumer trends. Purchases of discretionary
sporting goods tend to decline in periods of economic uncertainty. Any
significant decline in general economic conditions or continued uncertainties
regarding future economic prospects that affect consumer spending could have a
material adverse effect on the Company's business, results of operations and
financial condition. In the past ten years, there has been a renewed public
interest in bicycling and fitness activities. There can be no assurance that the
public interest in bicycling and fitness activities will continue, or that the
Company will continue to grow or be able to sustain the level of bicycle sales
that historically has been achieved. Any general decline in the size of the
bicycle market or in a segment of the bicycle market in which the Company
competes, whether from general economic conditions, a decrease in the popularity
of bicycling or otherwise, could have a material adverse effect on the Company's
business, results of operations and financial condition.


                                       13
<PAGE>   14
TECHNOLOGICAL ADVANCEMENTS AND NEW PRODUCT INTRODUCTIONS. The bicycle industry,
in recent years, has been characterized by significant technological advances
and frequent new product introductions. The Company believes that the frequent
introduction of new, innovative bicycles, parts and accessories that respond
timely to changing consumer demands and trends will be critical to its future
success. In the past, the Company generally has been successful in the
introduction of its bicycles, parts and accessories. No assurance can be given,
however, that the Company will be able to continue to design and manufacture
products that will achieve commercial success.

QUARTERLY FLUCTUATIONS AND SEASONALITY. Operating results fluctuate on a
quarterly basis due to a variety of factors, including the cycles of dealer
orders, shipment of products from foreign suppliers, the number and timing of
new product introductions, the timing of operating and advertising expenditures
and changes in the mix of products ordered by dealers. Typically, the Company's
operating expenses are higher in the third quarter primarily due to annual
introductions of new bicycle models and participation in annual industry
tradeshows. In addition, the Company's business has seasonal elements based on
bicycle model years, weather, the year-end shopping season and other factors.
The Company believes that factors such as fluctuations in the quarterly
operating results could cause the price of the common stock to fluctuate
substantially.

COMPETITION. The market for bicycles, parts and accessories, both in the United
States and internationally, is highly competitive. In all of its product
categories, the Company competes with other manufacturers and distributors, some
of which have well-recognized brand names and substantial financial,
technological, distribution, advertising and marketing resources. In addition,
there are several bicycle manufacturers and component suppliers with substantial
resources that do not currently compete directly with the Company, but which
could pose significant competition to the Company in the future. There can be no
assurance that the Company will be able to compete successfully in the future.

DEPENDENCE ON CERTAIN SUPPLIERS. As is common in the industry, a substantial
majority of the Company's multi-speed bicycles contain componentry supplied on a
purchase order basis by one Japanese manufacturer. Although such supplier has
not indicated any intention to limit or reduce sales of parts to the Company, if
it were to do so, the Company's business, results of operations and financial
condition could be adversely affected. In addition, the Company purchases
substantially all of its bicycles that are manufactured overseas from a limited
group of manufacturers, which varies from year to year. The Company has no
long-term contracts with these suppliers and competes with other companies for
their production capacities. Although the Company has established relationships
with its principal suppliers and manufacturing sources, the Company's future
success will depend on its ability to maintain such relationships and to develop
relationships with new suppliers and manufacturing sources for the production
and sale of bicycles, parts and accessories. In the event of a delay or
disruption in the supply of bicycles, parts and accessories, the Company
believes that suitable alternative suppliers could be obtained, although the
transition to other suppliers could result in significant production delays. Any
significant delay or disruption in the supply of bicycles, parts and accessories
could have a material adverse effect on the Company's business, results of
operations and financial condition.

PRODUCT LIABILITY. Because of the nature of the Company's business, the Company
at any particular time is a defendant in a number of product liability lawsuits
and expects that this will continue to be the case in the future. These lawsuits
generally seek damages, sometimes in substantial amounts, for personal injuries
allegedly sustained as a result of defects in the Company's products. Although
the Company maintains product liability insurance, due to the uncertainty as to
the nature and extent of manufacturers' and distributors' liability for personal
injuries, there is no assurance that the product liability insurance maintained
by the Company is or will be adequate to cover product liability claims or that
the applicable insurer will be solvent at the time of any covered loss. In
addition, due to deductibles, self-retention levels and aggregate coverage
amounts applicable under the Company's insurance policies, the Company will bear
responsibility for a significant portion, if not all, of the defense costs
(which include attorneys' fees and expenses incurred in the defense of any
claim), and the related payments to satisfy any judgments associated with any
claim asserted against the Company in excess of any applicable coverage.



                                       14
<PAGE>   15
The successful assertion or settlement of an uninsured claim, the settlement of
a significant number of insured claims, or a claim exceeding the Company's
insurance coverage could have a material adverse effect on the Company's
business, results of operations and financial condition. In addition, there can
be no assurance that insurance will remain available, or if available, will not
be prohibitively expensive.

CURRENCY FLUCTUATIONS. A portion of the Company's sales outside of North America
are denominated in local currencies. In addition, certain components purchased
by the Company are purchased in local currencies. Accordingly, the Company is
subject to the risks associated with fluctuations in currency rates. The Company
has not in the past experienced significant losses associated with currency
exchange fluctuations, but there can be no assurance that it will not experience
such losses in the future, particularly in light of the increasing portion of
net revenues resulting from sales outside North America and through its foreign
operating subsidiaries. Should the exposure relating to losses for currency
fluctuations increase substantially, the Company may consider the advisability
of implementing a hedging strategy under which it would enter into forward
contracts against certain foreign currencies in an effort to minimize its
exposure on certain significant foreign currency receivables and component
purchases. Such hedging activities, if commenced, would only partially address
the Company's risks in currency exchange transactions, and there can be no
assurance that this strategy would be successful, if at all. Further there can
be no assurance that the Company's results of operations will not be affected by
currency fluctuations.

FORWARD LOOKING STATEMENTS. This quarterly report contains certain forward
looking statements that involve risks and uncertainties. Certain risks and
uncertainties that may impact the accuracy of the forward looking statements
with respect to revenues, expenses and operating results include, without
limitation, cycles of dealer orders, general economic conditions and changing
consumer trends, technological advances and the number and timing of new product
introductions, shipments of products and componentry from foreign suppliers, the
timing of operating and advertising expenditures and changes in the mix of
products ordered by independent bicycle dealers. Certain other risks and
uncertainties are described above.

Because of these and other factors that may affect the Company's operating
results, past financial performance should not be considered an indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods.


                                       15
<PAGE>   16
                           PART II. OTHER INFORMATION



ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)        Exhibits

<TABLE>
<CAPTION>
                                                                                  Sequentially
           Exhibit Number                                                         Numbered Page
           --------------                                                         -------------
<S>                         <C>                                                   <C>
           10.42            Second Amended and Restated Credit Agreement
                            (Receivables and Inventory) among the Company,
                            GT Bicycles California, Inc., Riteway Products
                            East, Inc., Riteway Products North Central,
                            Inc., Riteway Distributors Central, Inc.,
                            Riteway Distributors, Inc. and Bank of
                            America, N.T. and S.A., dated August 12, 1996.

           27               Financial Data Schedule.
</TABLE>


(b)        Reports on Form 8-K

           During the third quarter of 1996, the Company filed a Form 8-K, dated
           July 3, 1996, and a Form 8-K/A, dated September 16, 1996, regarding
           the acquisition of Caratti Sport Limited.



                                       16
<PAGE>   17
                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       GT BICYCLES, INC.


Date:  November 14, 1996               By:   /s/ Michael C. Haynes
                                             ------------------------
                                             Michael C. Haynes
                                             President and Chief
                                             Executive Officer
                                             (Principal Executive and
                                             Duly Authorized Officer)




                                       17
<PAGE>   18
                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
                                                                       Sequentially
Exhibit Number                                                         Numbered Page
--------------                                                         -------------
<S>                <C>                                                 <C>
10.42              Second Amended and Restated Credit Agreement
                   (Receivables and Inventory) among the Company,
                   GT Bicycles California, Inc., Riteway Products
                   East, Inc., Riteway Products North Central,
                   Inc., Riteway Distributors Central, Inc.,
                   Riteway Distributors, Inc. and Bank of
                   America, N.T. and S.A., dated August 12, 1996.

27                 Financial Data Schedule.
</TABLE>



                                       18