<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 March 31, 1998

                                       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.)


                2001 East Dyer Road, Santa Ana, California 92705
                    (Address of principal executive offices)

                                 (714) 481-7100
              (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 May 12, 1998
               -----                            ---------------------------
<S>                                             <C>
  Common Stock, $0.001 par value                         9,828,801
</TABLE>


<PAGE>   2
                                GT BICYCLES, INC.

             INDEX TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998


<TABLE>
<CAPTION>
                                                                                   Page Number
                                                                                   -----------
<S>                                                                                <C>
Part I. Financial Information

        Item 1. Condensed Consolidated Financial Statements

               Condensed Consolidated Balance Sheets as of March 31, 1998
                       and December 31, 1997                                             3

               Condensed Consolidated Statements of Operations for the
                    three-month periods ended March 31, 1998 and 1997                    4

               Condensed Consolidated Statements of Cash Flows for the
                      three-month periods ended March 31, 1998 and 1997                  5

               Notes to Condensed Consolidated Financial Statements                      6

        Item 2. Management's Discussion and Analysis of Financial Condition
                and Results of Operations                                                10

Part II. Other Information

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

        Signatures                                                                       17
</TABLE>


                                       2
<PAGE>   3
PART I. FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                               GT BICYCLES, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            March 31,       December 31,
ASSETS (NOTE 3)                                                               1998              1997
                                                                            ---------        ---------
                                                                                  (in thousands)
<S>                                                                         <C>              <C>      
Current assets:
      Cash                                                                  $      --        $     588
      Trade accounts receivable, net                                           64,102           52,418
      Inventories (note 2)                                                     78,475           80,985
      Prepaid expenses and other current assets                                 3,410            3,098
      Income taxes receivable                                                     124               --
      Deferred income taxes                                                     1,646            1,646
                                                                            ---------        ---------
          Total current assets                                                147,757          138,735

Property, plant and equipment, net                                             13,047           12,833
Goodwill and other intangibles, net                                            19,662           19,920
Other assets                                                                    1,184            1,161
Restricted cash from issuance of industrial development bonds                   2,839            3,607
Deferred income taxes                                                              25               25
                                                                            ---------        ---------

                      Total Assets                                          $ 184,514        $ 176,281
                                                                            =========        =========



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Current portion of long-term debt (note 3)                            $   5,521        $  92,883
      Current portion of capital lease obligations                                438              462
      Accounts payable                                                         10,387           11,915
      Accrued liabilities                                                       5,048            4,310
      Income taxes payable                                                         --              463
                                                                            ---------        ---------
          Total current liabilities                                            21,394          110,033

      Long-term debt, net of current portion  (note 3)                        101,111            4,438
      Capital lease obligations, net of current portion                           333              407
                                                                            ---------        ---------
          Total liabilities                                                   122,838          114,878

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,
          9,828,801 and 9,820,152 shares issued and outstanding
          at March 31, 1998 and December 31, 1997, respectively                    10               10
      Additional paid-in-capital                                               47,234           47,182
      Retained earnings                                                        14,691           14,608
      Accumulated other comprehensive income                                     (259)            (397)
                                                                            ---------        ---------
          Total stockholders' equity                                           61,676           61,403

                                                                            ---------        ---------
                      Total Liabilities and Stockholders' Equity            $ 184,514        $ 176,281
                                                                            =========        =========
</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
                                                                  March 31,
                                                            ---------------------
                                                              1998          1997
                                                            -------       -------
                                                            (in thousands, except
                                                               per share data)
<S>                                                         <C>           <C>    
Net sales                                                   $51,165       $51,170
Cost of sales                                                36,754        37,395
                                                            -------       -------
Gross profit                                                 14,411        13,775

Selling, general and administrative expenses                 12,355        10,995
                                                            -------       -------
Operating income                                              2,056         2,780

Interest expense                                              1,956         1,386
                                                            -------       -------
Income before taxes                                             100         1,394

Provision for income taxes                                       17           578
                                                            -------       -------

Net income                                                  $    83       $   816
                                                            =======       =======

Earnings per share:
   Basic                                                    $  0.01       $  0.08
                                                            =======       =======
   Diluted                                                  $  0.01       $  0.08
                                                            =======       =======

Weighted average common and common equivalent shares:
   Basic                                                      9,827         9,788
                                                            =======       =======
   Diluted                                                    9,918         9,954
                                                            =======       =======
</TABLE>


                                       4
<PAGE>   5
                               GT BICYCLES, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                            March 31,
                                                                                    ------------------------
                                                                                      1998            1997
                                                                                    --------        --------
                                                                                         (in thousands)
<S>                                                                                 <C>             <C>     
Cash flows from operating activities:
    Net income                                                                      $     83        $    816
    Adjustments to reconcile net income to net
      cash from operating activities:
      Depreciation and amortization                                                      882             394
      Provision for doubtful accounts                                                    156              60
      Foreign currency translation adjustment                                            138            (115)
    Changes in assets and liabilities:
      Trade accounts receivable                                                      (11,840)         (8,920)
      Inventories                                                                      2,510           1,467
      Prepaid expenses and other current assets                                         (312)             92
      Restricted cash and other assets                                                   745            (122)
      Accounts payable                                                                (1,528)         (2,920)
      Accrued and other liabilities                                                      738             502
      Income taxes receivable/payable                                                   (587)            158
                                                                                    --------        --------
          Net cash used in operating activities                                       (9,015)         (8,588)
                                                                                    --------        --------

Cash flows from investing activities:
    Purchases of property, plant and equipment                                          (838)         (1,854)
                                                                                    --------        --------
          Net cash used in investing activities                                         (838)         (1,854)
                                                                                    --------        --------

Cash flows from financing activities:
    Net borrowings under lines of credit                                              10,458          11,461
    Principal payments on term loan and industrial development bonds                  (1,147)         (1,063)
    Principal payments on capital lease obligations                                      (98)            (47)
    Proceeds from issuance of common stock                                                52              91
                                                                                    --------        --------
          Net cash provided by financing activities                                    9,265          10,442
                                                                                    --------        --------

Change in cash and cash equivalents                                                     (588)             --
Cash and cash equivalents at beginning of period                                         588              --
                                                                                    --------        --------
Cash and cash equivalents at end of period                                          $     --        $     --
                                                                                    ========        ========

Supplemental disclosure of cash flow information: 
Cash paid during the period for:
      Interest                                                                      $  1,981        $  1,362
                                                                                    ========        ========
      Income taxes                                                                  $    604        $    427
                                                                                    ========        ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>   6
                                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"), as well as the
majority-owned subsidiaries, Innovations in Composites, Inc. ("Innovations") and
Riteway Products Canada Limited ("Riteway Canada"). Investments in affiliates,
for which the Company has an ownership interest of at least 20% but not
exceeding 50%, are recorded under the equity method of accounting.

The Company held a 45% ownership interest in Innovations from 1993 through June
1997. In July 1997, the Company increased its ownership level in Innovations to
57% through the purchase of additional common shares. At that date, the Company
changed its method of accounting for Innovations from the equity method to
consolidation. Riteway Canada was formed in September 1997 as an 85%-owned
subsidiary of the Company. The interest of minority shareholders in the equity
of Innovations and Riteway Canada is included in accrued liabilities on the
accompanying balance sheets and their interest in the earnings of these entities
is included in selling, general and administrative expenses on the accompanying
statement of operations; such amounts were not material in the periods
presented.

All significant intercompany balances and transactions are eliminated in
consolidation.

Foreign Currency Translation

The Company uses the local currency of the respective country 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 a component of accumulated other
comprehensive income. There were no significant foreign currency transaction
gains or losses in the periods presented.

Earnings per Share

Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"), which
replaces the former primary and fully-diluted earnings per share with basic and
diluted earnings per share. All earnings per share amounts have been restated to
conform with the SFAS No. 128 presentation. In each of the quarters ended March
31, 1998 and 1997, the difference in weighted average shares used in the
calculation of basic and diluted earnings per share is solely attributable to
the incremental shares resulting from the assumed exercise of dilutive stock
options.

Reporting Comprehensive Income

Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), which
establishes new rules for the reporting and display of comprehensive income and
its components. Annual financial statements will be reclassified as required.



                                       6
<PAGE>   7
A summary of the Company's comprehensive income follows:

<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                        March 31, 1998     March 31, 1997
                                                        --------------     --------------
                                                                 (in thousands)
<S>                                                          <C>                <C>  
Net income                                                   $  83              $ 816
Foreign currency translation adjustment                        138               (115)
                                                             -----              -----
 Comprehensive income                                        $ 221              $ 701
                                                             =====              =====
</TABLE>

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-month period ended March 31, 1998 are not necessarily
indicative of the operating results to be expected for the full year.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the year ended December 31, 1997.

(2) INVENTORIES

A summary of the components of inventories follows:

<TABLE>
<CAPTION>
                                         March 31,     December 31,
                                            1998           1997
                                          -------        -------
                                              (in thousands)
<S>                                       <C>            <C>    
Raw materials                             $   756        $   678
Work in process                             2,840          3,124
Finished goods and component parts         74,879         77,183
                                          -------        -------
                                          $78,475        $80,985
                                          =======        =======
</TABLE>


                                       7
<PAGE>   8
(3) LONG-TERM DEBT

Long-term debt is comprised of the following:

<TABLE>
<CAPTION>
                                                March 31,        December 31,
                                                   1998              1997
                                                ---------         ---------
                                                       (in thousands)
<S>                                             <C>               <C>      
Domestic revolving credit facility              $  70,674         $  65,490
Domestic term loan                                 10,625            11,688
Riteway Japan revolving credit facility             2,728             1,761
Riteway France revolving credit facility            3,486             3,280
Caratti revolving credit facility                  10,415            10,149
Riteway Canada revolving credit facility            3,835                --
Industrial development bonds payable                4,804             4,888
Promissory note payable                                65                65
                                                ---------         ---------
                                                  106,632            97,321
Less current portion                               (5,521)          (92,883)
                                                ---------         ---------
                                                $ 101,111         $   4,438
                                                =========         =========
</TABLE>

At March 31, 1998, the Company had credit agreements with a bank that provided
for a domestic revolving credit facility, a domestic term loan, and separate
revolving credit facilities for the Riteway Japan, Riteway France and Caratti
subsidiaries. Such credit agreements were scheduled to expire on June 30, 1998
and, accordingly, the related borrowings were classified as current liabilities
at December 31, 1997.

In April 1998, the Company refinanced such borrowings on a long-term basis, as
described below. Accordingly, the revolving credit facilities and the portion of
the term loan which does not mature within one year have been classified as
noncurrent liabilities at March 31, 1998.

The Company entered into a new domestic revolving credit facility with an
affiliate of its existing bank. The facility expires in April 2001 and is
secured by substantially all of the Company's assets. The facility provides for
maximum borrowings and letters of credit equal to the lesser of $75.0 million or
the Company's borrowing base associated with accounts receivable and
inventories, as defined by the agreement. The amount individually available
under commercial and standby letters of credit is $15.0 million. The Company has
the option to pay interest on borrowings at the bank's reference rate plus the
applicable margin (as defined in the agreement) or LIBOR plus the applicable
margin (as defined in the agreement); such interest rates may decrease in the
future if the Company meets certain financial ratio criteria. The weighted
average interest rate on the facility was 8.16% at April 30, 1998. The Company
must pay a monthly commitment fee equal to .25% per annum on the unused amount
of the $75.0 million maximum available credit. The agreement requires that the
Company maintain certain financial ratios and other covenants, which, among
other things, restrict other indebtedness, capital expenditures and certain
investments.

The Company's separate revolving credit facilities for Riteway France and
Riteway Japan, which provide for maximum borrowings of $3.5 million and $3.0
million, respectively, were also extended in connection with the aforementioned
new domestic facility. In addition, the Company received a commitment from its
bank to extend the Caratti facility to April 2001 and to increase the maximum
borrowings thereunder from $10.0 million to $15.0 million.

The domestic term loan outstanding at March 31, 1998 was replaced by a $20.0
million term loan with the Company's existing bank. The new loan requires
quarterly principal payments of $1.3 million through June 1999 with a final
balloon payment of the remaining principal in July 1999. The Company has the
option to pay interest on borrowings at the bank's reference rate plus the
applicable margin (as defined in the agreement) or LIBOR plus the applicable
margin (as defined in the agreement). The interest rate on the term loan was
9.63% at April 30, 1998. In 

                                       8
<PAGE>   9
addition, in connection with the term loan, the Company issued a warrant which
gives the bank the right to purchase 525,765 shares of the Company's common
stock at $6.58 per share, which represented the average of the closing prices of
the Company's common stock on the Nasdaq market during a specified period in
January 1998. The warrant becomes exercisable based on the following schedule:
one-third in September 1998, one-third in December 1998 and one-third in March
1999, provided that the Company has not yet repaid the term loan in full as of
such dates.

Also in April 1998, the Company entered into an unsecured revolving credit
facility with another financial institution. This facility, which expires in
October 1999, provides for maximum borrowings of $3.0 million. Interest is based
on specified commercial paper rates plus the applicable margin (as defined in
the agreement). The interest rate on the facility was 8.02% at April 30, 1998.

In February 1998, Riteway Canada entered into a revolving credit facility with a
Canadian bank. This facility, which expires in February 2000, provides for
maximum borrowings equal to the lesser of C$9.0 million (approximately US$6.3
million) or Riteway Canada's borrowing base associated with accounts receivable
and inventories, as defined in the agreement. Interest is payable monthly at the
bank's prime rate plus the applicable margin (as defined in the agreement). The
interest rate on the facility was 7.75% at April 30, 1998.


                                       9
<PAGE>   10
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, and parts and accessories of other manufacturers, to
independent bicycle dealers.

RESULTS OF OPERATIONS

Net Sales. Net sales of $51.2 million in the quarter ended March 31, 1998 were
unchanged from the corresponding prior-year quarter. Domestic sales increased
$0.7 million due to higher sales of parts and accessories; domestic sales of
bicycles were at approximately the same level as in the prior-year quarter.
International sales decreased $0.7 million, as lower export shipments to
independent distributors more than offset higher sales by the Company's
subsidiaries in Canada, France, Japan and the United Kingdom. In particular, the
stronger U.S. dollar adversely affected orders from independent European
distributors, who could not pass on currency-related higher prices to their
customers.

Gross Profit. Gross profit, as a percentage of net sales, was 28.2% and 26.9% in
the quarters ended March 31, 1998 and 1997, respectively. The increase primarily
reflected a change in the mix of products sold, with a greater proportion of
sales coming from higher-margin parts and accessories and juvenile bicycles.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") for the quarter ended March 31, 1998 increased
by $1.4 million, or 12.3%, over the corresponding prior-year quarter and
increased as a percentage of net sales to 24.1% from 21.5%. Approximately half
of the dollar increase was attributable to expenses incurred at Riteway Canada
and Innovations, which were not consolidated during the first quarter last year,
and higher expenses at the Company's subsidiaries in France, Japan and the
United Kingdom. The remaining increase primarily reflected higher U.S. marketing
and advertising expenses to promote brand equity and higher operating costs
associated with the new Santa Ana facility. Partially offsetting these increases
were approximately $0.3 million of nonrecurring relocation costs incurred during
the first quarter of 1997 in connection with the Company's move to the new Santa
Ana facility.

Interest Expense. Interest expense for the quarter ended March 31, 1998
increased $0.6 million, or 41.1%, from the corresponding prior-year quarter. The
increase was principally due to a combination of higher borrowings under the
Company's revolving bank credit agreements and a higher effective interest rate
on such borrowings. Based on expected borrowing levels and interest rates under
the Company's new bank facilities, the Company anticipates that interest expense
for the remainder of 1998 will exceed 1997 interest expense.

Income Taxes. The Company's effective tax rate was 17.0% and 41.5% in the
quarters ended March 31, 1998 and 1997, respectively. The relatively low 1998
first quarter tax rate primarily reflected tax benefits at one of the Company's
foreign subsidiaries and the mix of domestic and foreign earnings in the
quarter. The Company expects that the annual 1998 consolidated tax provision
will be comparable to the 39.4% annual rate incurred in 1997.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1998, the Company had credit agreements with a bank that provided
for a domestic revolving credit facility, a domestic term loan, and separate
revolving credit facilities for the Riteway 



                                       10
<PAGE>   11
Japan, Riteway France and Caratti subsidiaries. Such credit agreements were
scheduled to expire on June 30, 1998.

In April 1998, the Company restructured its banking arrangements to provide
longer-term financing, as summarized below.

The Company entered into a new domestic revolving credit facility with an
affiliate of its existing bank. The facility expires in April 2001 and is
secured by substantially all of the Company's assets. The facility provides for
maximum borrowings and letters of credit equal to the lesser of $75.0 million or
the Company's borrowing base associated with accounts receivable and
inventories, as defined by the agreement. The amount individually available
under commercial and standby letters of credit is $15.0 million. The Company has
the option to pay interest on borrowings at the bank's reference rate plus the
applicable margin (as defined in the agreement) or LIBOR plus the applicable
margin (as defined in the agreement); such interest rates may decrease in the
future if the Company meets certain financial ratio criteria. The weighted
average interest rate on the facility was 8.16% at April 30, 1998. The Company
must pay a monthly commitment fee equal to .25% per annum on the unused amount
of the $75.0 million maximum available credit. The agreement requires that the
Company maintain certain financial ratios and other covenants, which, among
other things, restrict other indebtedness, capital expenditures and certain
investments.

The Company's separate revolving credit facilities for Riteway France and
Riteway Japan, which provide for maximum borrowings of $3.5 million and $3.0
million, respectively, were also extended in connection with the aforementioned
new domestic facility. In addition, the Company received a commitment from its
bank to extend the Caratti facility to April 2001 and to increase the maximum
borrowings thereunder from $10.0 million to $15.0 million.

The domestic term loan outstanding at March 31, 1998 was replaced by a $20.0
million term loan with the Company's existing bank. The new loan requires
quarterly principal payments of $1.3 million through June 1999 with a final
balloon payment of the remaining principal in July 1999. The Company has the
option to pay interest on borrowings at the bank's reference rate plus the
applicable margin (as defined in the agreement) or LIBOR plus the applicable
margin (as defined in the agreement). The interest rate on the term loan was
9.63% at April 30, 1998. In addition, in connection with the term loan, the
Company issued a warrant which gives the bank the right to purchase 525,765
shares of the Company's common stock at $6.58 per share, which represented the
average of the closing prices of the Company's common stock on the Nasdaq market
during a specified period in January 1998. The warrant becomes exercisable based
on the following schedule: one-third in September 1998, one-third in December
1998 and one-third in March 1999, provided that the Company has not yet repaid
the term loan in full as of such dates.

Also in April 1998, the Company entered into an unsecured revolving credit
facility with another financial institution. This facility, which expires in
October 1999, provides for maximum borrowings of $3.0 million. Interest is based
on specified commercial paper rates plus the applicable margin (as defined in
the agreement). The interest rate on the facility was 8.02% at April 30, 1998.

In February 1998, Riteway Canada entered into a revolving credit facility with a
Canadian bank. This facility, which expires in February 2000, provides for
maximum borrowings equal to the lesser of C$9.0 million (approximately US$6.3
million) or Riteway Canada's borrowing base associated with accounts receivable
and inventories, as defined in the agreement. Interest is payable monthly at the
bank's prime rate plus the applicable margin (as defined in the agreement). The
interest rate on the facility was 7.75% at April 30, 1998.

The Company's operating activities used cash of $9.0 million and $8.6 million in
the quarters ended March 31, 1998 and 1997, respectively. The higher cash usage
in 1998 primarily reflected a larger increase in accounts receivable, partially
offset by a larger inventory reduction and a smaller accounts payable decrease.
As is normal industry practice, the Company maintains relatively high levels of
receivables during the winter months in connection with its credit policies. The
Company's capital expenditures of $0.8 million in the quarter ended March 31,
1998 were less than the $1.9 million of 



                                       11
<PAGE>   12
capital expenditures in the corresponding 1997 quarter, which included leasehold
improvements and equipment purchased for the Company's new Santa Ana facility.
The aforementioned 1998 and 1997 operating and investing cash outlays were
financed primarily with additional borrowings under the Company's revolving
lines of credit.

The Company anticipates that it will continue to rely on bank credit, vendor
credit and cash generated from operations in order to finance anticipated higher
inventory and accounts receivable levels. The Company believes that the
restructured financing described above will be sufficient to satisfy the
Company's working capital and capital expenditure requirements through at least
the next 12 months.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"), which establishes
standards for reporting financial and descriptive information about an
enterprise's operating segments in its annual financial statements and selected
segment information in interim financial reports. SFAS No. 131 becomes effective
for the Company's 1998 annual financial statements and for its 1999 interim
financial statements. Restatement of comparative prior-year financial statements
will be required in the periods in which the Company first applies SFAS No. 131.

YEAR 2000

The Company has performed a preliminary examination of its major software
applications to determine whether each system is prepared to accommodate the
year 2000. This examination included a review of program code which is
maintained by the Company as well as obtaining confirmation from outside
software vendors that their products are year 2000 compliant. The Company
believes that, based on its current examination, the year 2000 will not have a
material adverse impact on the Company's operations and that the costs to
accommodate the year 2000 will not be material. However, there can be no
assurance that software incompatibility with the year 2000 on the part of the
Company or any of its significant suppliers will not cause an interruption of
operations or other limitations of system functionality, or that the Company
will not incur substantial costs to avoid such occurrences. By the end of 1998,
the Company plans to complete an extensive assessment of the readiness of its
software applications with respect to year 2000 issues and any related
accommodation costs.


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. While in the past ten years, there has been a renewed
public interest in bicycling and fitness activities, in the past two years,
there has been a decline in the demand for adult bicycles domestically. 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 it has historically 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.

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 



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<PAGE>   13
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.

INDEBTEDNESS; LIQUIDITY. The credit agreements relating to the Company's
outstanding indebtedness require the Company to maintain certain financial
ratios and profitability levels, as well as other affirmative and negative
covenants. While the Company expects to comply with these requirements, any
failure to comply with covenants or restrictions contained in one or more of the
credit agreements could result in a default thereunder, which in turn could
cause the Company's indebtedness to be declared immediately due and payable. The
Company has in the past renegotiated certain provisions of the credit agreements
to relax certain of the financial covenants to adapt to the Company's then
existing financial condition, although there can be no assurance that the
lenders will renegotiate provisions of the credit agreements in the future.
Although the Company believes that its cash from operations, its revolving
credit arrangements and vendor credit, and its existing working capital will be
sufficient to satisfy the Company's anticipated working capital and capital
expenditure requirements through at least the next twelve months, the Company
may need to seek additional sources of capital as necessary or appropriate to
finance acquisitions or otherwise finance the Company's operations during such
period of time and thereafter.

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 trade
shows. 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 this 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 or delivery of bicycles, parts and accessories, the
Company believes that suitable alternative suppliers and carriers could be
obtained, although the transition to other suppliers and delays in the delivery
of bicycle components could result in significant production delays. Any
significant delay or disruption in the 



                                       13
<PAGE>   14
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. In
addition, from time to time, the Company may make recalls of certain of its
products in cooperation with the Consumer Products Safety Commission. Such
product recalls and any potential product defects related thereto may also
result in claims for personal injury. 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. 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. From time to time, the Company has entered 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 only partially address the Company's risks in
currency exchange transactions, and there can be no assurance that this strategy
will continue to be successful. Further there can be no assurance that the
Company's results of operations will not be adversely affected by currency
fluctuations.




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<PAGE>   15

FORWARD-LOOKING STATEMENTS. THIS QUARTERLY REPORT CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, THAT INVOLVE RISKS AND UNCERTAINTIES. IN ADDITION, THE COMPANY MAY
FROM TIME TO TIME MAKE ORAL FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS ARE
UNCERTAIN AND MAY BE IMPACTED BY THE FOLLOWING FACTORS. IN PARTICULAR, 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 AND COMPETITIVE
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. AS A
RESULT, THE ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS.

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.



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<PAGE>   16
PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         Exhibit Number

         10.59  Business Credit and Security Agreement, Dated as of February 9,
                1998, between Riteway Products Canada, Ltd. and Deutsche
                Financial Services, a Division of Deutsche Bank Canada.

         27.1   Financial data schedule

(b)      Reports on Form 8-K

         None

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<PAGE>   17
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                          GT BICYCLES,  INC.


Date:   May 15, 1998                      By:  /s/ Charles Cimitile
                                               --------------------------------
                                               Charles Cimitile
                                               Vice President Finance
                                               and Chief Financial
                                               Officer
                                               (Principal Financial
                                               and Accounting Officer
                                               and Duly Authorized
                                               Officer)

                                       17
<PAGE>   18
                                 EXHIBIT INDEX

        EXHIBIT
        NUMBER                          DESCRIPTION
        -------                         -----------
         10.59    Business Credit and Security Agreement, Dated as of February 
                  9, 1998, between Riteway Products Canada, Ltd. and Deutsche
                  Financial Services, a Division of Deutsche Bank Canada.

         27.1     Financial data schedule