<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 JUNE 30, 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.


             Class                               Outstanding at August 10, 1998
             -----                               ------------------------------

Common Stock, $0.001 par value                             9,856,463

<PAGE>   2

                                GT BICYCLES, INC.

             INDEX TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998

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

        Item 1. Condensed Consolidated Financial Statements

                Condensed Consolidated Balance Sheets as of June 30, 1998
                    and December 31, 1997                                               3

                Condensed Consolidated Statements of Operations for the
                    three and six month periods ended June 30, 1998 and 1997            4

                Condensed Consolidated Statements of Cash Flows for the
                    six month periods ended June 30, 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>
                                                                               June 30,           December 31,
ASSETS (NOTE 3)                                                                   1998               1997
                                                                               ---------           ---------
                                                                                      (in thousands)
<S>                                                                            <C>                 <C>      
Current assets:
      Cash                                                                     $     224           $     588
      Trade accounts receivable, net                                              53,260              52,418
      Inventories (note 2)                                                        72,447              80,985
      Prepaid expenses and other current assets                                    4,137               3,098
      Income taxes receivable                                                         92                  --
      Deferred income taxes                                                        1,646               1,646
                                                                               ---------           ---------
          Total current assets                                                   131,806             138,735

Property, plant and equipment, net                                                13,141              12,833
Goodwill and other intangibles, net                                               19,386              19,920
Other assets                                                                         933               1,161
Restricted cash from issuance of industrial development bonds                      2,875               3,607
Deferred income taxes                                                                 25                  25
                                                                               ---------           ---------

                      Total Assets                                             $ 168,166           $ 176,281
                                                                               =========           =========



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Current portion of long-term debt (note 3)                               $   5,528           $  92,883
      Current portion of capital lease obligations                                   447                 462
      Accounts payable                                                             8,651              11,915
      Accrued liabilities                                                          6,332               4,310
      Income taxes payable                                                            --                 463
                                                                               ---------           ---------
          Total current liabilities                                               20,958             110,033


Long-term debt, net of current portion  (note 3)                                  84,537               4,438
Capital lease obligations, net of current portion                                    208                 407
                                                                               ---------           ---------
          Total  liabilities                                                     105,703             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,
          9,847,221 and 9,820,152 shares issued and outstanding
          at June 30, 1998 and December 31, 1997, respectively                        10                  10
      Additional paid-in-capital                                                  47,432              47,182
      Retained earnings                                                           15,091              14,608
      Accumulated other comprehensive income                                         (70)               (397)
                                                                               ---------           ---------
          Total stockholders' equity                                              62,463              61,403


                                                                               ---------           ---------
                      Total Liabilities and Stockholders' Equity               $ 168,166           $ 176,281
                                                                               =========           =========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>   4

                               GT BICYCLES, INC.

                 CONDENSED CONSLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             Three Months Ended           Six Months Ended
                                                                  June 30,                    June 30,
                                                           ----------------------      ----------------------
                                                             1998          1997          1998          1997
                                                           --------      --------      --------      --------
                                                               (in thousands, except per share data)
<S>                                                        <C>           <C>           <C>           <C>     
Net sales                                                  $ 57,655      $ 50,769      $108,820      $101,939
Cost of sales                                                41,742        36,972        78,496        74,367
                                                           --------      --------      --------      --------
Gross profit                                                 15,913        13,797        30,324        27,572

Selling, general and administrative expenses                 13,044        11,948        25,399        22,943
                                                           --------      --------      --------      --------
Operating income                                              2,869         1,849         4,925         4,629

Interest expense                                              2,178         1,405         4,134         2,791
                                                           --------      --------      --------      --------
Income before taxes                                             691           444           791         1,838

Provision for income taxes                                      291           160           308           738
                                                           --------      --------      --------      --------

Net income                                                 $    400      $    284      $    483      $  1,100
                                                           ========      ========      ========      ========

Earnings per share:
   Basic                                                   $   0.04      $   0.03      $   0.05      $   0.11
                                                           ========      ========      ========      ========
   Diluted                                                 $   0.04      $   0.03      $   0.05      $   0.11
                                                           ========      ========      ========      ========

Weighted average common and common equivalent shares:
   Basic                                                      9,840         9,797         9,833         9,793
                                                           ========      ========      ========      ========
   Diluted                                                    9,925         9,909         9,919         9,922
                                                           ========      ========      ========      ========
</TABLE>

                                       4
<PAGE>   5

                               GT BICYCLES, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      Six Months Ended
                                                                                           June 30,
                                                                                   -----------------------
                                                                                     1998           1997
                                                                                   --------       --------
                                                                                        (in thousands)
<S>                                                                                <C>            <C>     
Cash flows from operating activities:
    Net income                                                                     $    483       $  1,100
    Adjustments to reconcile net income to net
      cash from operating activities:
      Depreciation and amortization                                                   1,723          1,080
      Provision for doubtful accounts                                                   392            120
      Foreign currency translation adjustment                                           327           (308)
    Changes in assets and liabilities:
      Trade accounts receivable                                                      (1,234)         4,636
      Inventories                                                                     8,538          7,179
      Prepaid expenses and other current assets                                      (1,039)          (525)
      Restricted cash and other assets                                                  960           (231)
      Accounts payable                                                               (3,264)            30
      Accrued and other liabilities                                                   2,022            282
      Income taxes receivable/payable                                                  (555)          (454)
                                                                                   --------       --------
          Net cash  provided by operating activities                                  8,353         12,909
                                                                                   --------       --------

Cash flows from investing activities:
    Purchases of property, plant and equipment                                       (1,497)        (4,491)
    Additional investment in subsidiary                                                  --           (713)
                                                                                   --------       --------
          Net cash used in investing activities                                      (1,497)        (5,204)
                                                                                   --------       --------

Cash flows from financing activities:
    Net repayments under revolving lines of credit                                  (14,107)        (5,548)
    Borrowings under new term loan                                                   20,000             --
    Retirement of previous term loan                                                (10,625)            --
    Principal payments on term loans and other debt                                  (2,524)        (2,125)
    Principal payments on capital lease obligations                                    (214)          (182)
    Proceeds from issuance of common stock and stock warrants                           250            150
                                                                                   --------       --------
          Net cash used in financing activities                                      (7,220)        (7,705)
                                                                                   --------       --------

Change in cash and cash equivalents                                                    (364)            --
Cash and cash equivalents at beginning of period                                        588             --
                                                                                   --------       --------
Cash and cash equivalents at end of period                                         $    224       $     --
                                                                                   ========       ========

Supplemental disclosure of cash flow information: 
   Cash paid during the period for:
      Interest                                                                     $  4,163       $  2,823
                                                                                   ========       ========
      Income taxes                                                                 $    863       $  1,219
                                                                                   ========       ========
</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 periods ended June
30, 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 and warrants.

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                Six Months
                                                Ended June 30              Ended June 30
                                             --------------------       --------------------
                                              1998         1997          1998         1997
                                             -------      -------       -------      -------
                                                            (in thousands)
<S>                                          <C>          <C>           <C>          <C>    
Net income                                   $   400      $   284       $   483      $ 1,100
Foreign currency translation adjustment          189         (193)          327         (308)
                                             -------      -------       -------      -------
Comprehensive income                         $   589      $    91       $   810      $   792
                                             =======      =======       =======      =======
</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 and six month periods ended June 30, 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>
                                        June 30,   December 31,
                                         1998         1997
                                        -------      -------
                                           (in thousands)
<S>                                     <C>          <C>    
Raw materials                           $   709      $   678
Work in process                           2,901        3,124
Finished goods and component parts       68,837       77,183
                                        -------      -------
                                        $72,447      $80,985
                                        =======      =======
</TABLE>


                                       7
<PAGE>   8

(3) LONG-TERM DEBT
------------------

Long-term debt is comprised of the following:

<TABLE>
<CAPTION>
                                                        June 30,        December 31,
                                                          1998             1997
                                                        --------         --------
                                                             (in thousands)
<S>                                                     <C>              <C>     
Domestic revolving credit facility with bank and
  bank affiliate                                        $ 46,234         $ 65,490
Other domestic revolving credit facility                   3,000               --
Domestic term loan                                        18,750           11,688
Caratti revolving credit facility                         10,213           10,149
Riteway France revolving credit facility                   3,026            3,280
Riteway Japan revolving credit facility                    1,285            1,761
Riteway Canada revolving credit facility                   2,815               --
Industrial development bonds payable                       4,677            4,888
Promissory note payable                                       65               65
                                                        --------         --------
                                                          90,065           97,321
Less current portion                                      (5,528)         (92,883)
                                                        --------         --------
                                                        $ 84,537         $  4,438
                                                        ========         ========
</TABLE>

During 1998, the Company refinanced its borrowings on a long-term basis, as
described below. Accordingly, the revolving credit facilities, the portion of
the term loan which does not mature within one year, and the promissory note
payable have been classified as noncurrent liabilities at June 30, 1998.

In April 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 8.22% at June 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.

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 8.05% at June 30, 1998.

The previous domestic term loan 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 June 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 on
September 1, 1998, one-third on December 1, 1998 and one-third on March 1, 1999,


                                       8
<PAGE>   9

provided that the Company has not yet repaid the term loan in full as of such
dates. During the second quarter, the Company accrued $0.1 million of expense to
reflect a pro rata portion of the estimated fair value of these warrants.

The Company also extended the Caratti facility with an affiliate of its existing
bank. This facility expires in April 2001 and provides for maximum borrowings
and letters of credit equal to the lesser of Pound Sterling 10.0 million
(approximately US$16.5 million) or Caratti's borrowing base associated with
accounts receivable and inventories, as defined in the agreement. The interest
rate on the facility was 9.31% at June 30, 1998.

In connection with the extension of the domestic facility, the Company's
separate revolving credit facilities for Riteway France and Riteway Japan were
also extended to April 2001 and the maximum borrowings under each facility were
increased to $4.0 million.

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 June 30, 1998.

(4) PRODUCT RECALL
------------------

In March 1998, the Company voluntarily initiated a product recall which involves
approximately 10,000 aluminum juvenile BMX bicycles and frames manufactured and
sold during the years 1995 to 1998. The recall, which is being conducted in
cooperation with the Consumer Products Safety Commission, includes certain GT
Speed Series and Robinson bicycles and frames. The problem involves cracking in
the frames when the bicycles are subjected to the jumps and other stresses of
today's more aggressive BMX riding. The Company has discontinued the use of
these frames and has designed a significantly stronger frame for use on these
BMX bicycles. The Company has made public press announcements in order to make
consumers aware of the recall, and has also instituted a program whereby
independent bicycle dealers are instructed to contact affected consumers (as
required by their dealer agreements) and install upgraded replacement frames
provided by the Company. It is not possible to predict the actual number of
frames which will be returned, but of those returns which are to be received, it
is expected that the significant majority will occur by the end of 1998 and any
remaining returns will occur within two years. To date, approximately 3,500
frames have been returned. The total cost incurred with respect to this recall
is approximately $0.5 million and $0.7 million in the quarter and six months
ended June 30, 1998; such amounts are included in cost of sales in the
accompanying financial statements.

(5) AGREEMENT TO MERGE WITH SCHWINN HOLDINGS CORPORATION
--------------------------------------------------------

On June 22, 1998, the Company entered into an Agreement and Plan of Merger by
and among the Company, Schwinn Holdings Corporation, a Delaware corporation, and
SPK Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of Schwinn Holdings Corporation. Pursuant to the terms of the
Agreement and Plan of Merger, SPK Acquisition Corporation will merge with and
into the Company resulting in the Company becoming a wholly-owned subsidiary of
Schwinn Holdings Corporation. Upon the completion of the merger, the Company's
stockholders will receive $8.00 in cash for each share of the Company's common
stock they own. The Company currently anticipates that a stockholders' meeting
will be held in September 1998, and assuming the stockholders approve the
merger, the transaction will be consummated shortly thereafter.


                                       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 for both the quarter and the six months ended June 30, 1998
increased $6.9 million over the corresponding prior-year periods. This
represents a 14% increase for the quarter and a 7% increase for the six months.
For the quarter, domestic sales increased $2.4 million and foreign sales
increased $4.5 million, while for the six months, domestic sales increased $3.2
million and foreign sales increased $3.7 million. The increases in domestic
sales resulted from higher shipments of adult and juvenile bicycles as well as
parts and accessories. The increase in foreign sales for the quarter was
attributable to both higher shipments by the Company's subsidiaries in Canada,
France, Japan and the United Kingdom as well as higher shipments to the
Company's independent foreign distributors. For the six months, the increase was
entirely attributable to higher shipments by the aforementioned Company
subsidiaries. Shipments to independent foreign distributors during the six-month
period ended June 30, 1998 were lower than in 1997 as the stronger U.S. dollar
adversely affected orders from Europe, where distributors could not pass on
currency-related higher prices to their customers.

Gross Profit. Gross profit, as a percentage of net sales, increased to 27.6% and
27.9%, respectively, in the quarter and six-month period ended June 30, 1998
compared with 27.2% and 27.0% in the corresponding periods of 1997. The
increases primarily reflected the favorable effect of Asian foreign currency
exchange rates on product costs, improved sourcing and a better business
environment which resulted in less pricing pressure. Partially offsetting these
factors were $0.5 million and $0.7 million, respectively, in the quarter and six
months ended June 30, 1998 of costs incurred in connection with the Company's
recall of certain aluminum juvenile BMX bicycles and frames.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses, including amortization of intangibles ("SG&A"), for the
quarter and six months ended June 30, 1998 increased by $1.1 million (9%) and
$2.5 million (11%), respectively, over the corresponding prior-year periods. As
a percentage of net sales, SG&A was 22.6% and 23.3% of net sales in the quarter
and six months, respectively, compared with 23.5% and 22.5% in the corresponding
prior year periods. For the quarter, the increase primarily consisted of $0.9
million of higher expenses associated with the Company's foreign subsidiaries in
France, Japan and the United Kingdom, $0.4 million of expenses incurred at
Riteway Canada and Innovations, which were not consolidated during the second
quarter last year, and $0.3 million of higher U.S. marketing and advertising
expenses to promote brand equity. For the six months, the increase consisted of
$1.3 million of higher expenses associated with the aforementioned foreign
subsidiaries, $0.8 million incurred at Riteway Canada and Innovations, $0.7
million of higher U.S. marketing and advertising expenses, and $0.7 million of
higher U.S. administrative and product development expenses. Partially
offsetting these increases were approximately $0.7 million and $1.0 million,
respectively, of relocation expenses incurred during the second quarter and
first six months of 1997 in connection with the Company's move to the new Santa
Ana facility.

Interest Expense. Interest expense for the quarter and six months ended June 30,
1998 increased by $0.8 million and $1.3 million, respectively, in comparison
with the corresponding 1997 periods. These increases were principally due to a
combination of higher borrowings under the Company's revolving bank credit
agreements and term loan and a higher effective interest rate on such
borrowings. Additionally, the Company recorded $0.1 million of expense during
the second quarter of 1998 in connection with the issuance of stock warrants to
its bank as part of the loan restructuring described in "Liquidity and Capital


                                       10
<PAGE>   11

Resources" below. 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 42.1% and 38.9%,
respectively, in the quarter and six months ended June 30, 1998, compared with
36.1% and 40.2% in the corresponding 1997 periods. The fluctuations in these
rates primarily reflect differences in the mix of domestic and foreign earnings
in the respective periods.

LIQUIDITY AND CAPITAL RESOURCES

In April 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 8.22% at June 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.

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 8.05% at June 30, 1998.

The previous domestic term loan 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 June 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 on
September 1, 1998, one-third on December 1, 1998 and one-third on March 1, 1999,
provided that the Company has not yet repaid the term loan in full as of such
dates. During the second quarter, the Company accrued $0.1 million of expense to
reflect a pro rata portion of the estimated fair value of these warrants.

The Company also extended the Caratti facility with an affiliate of its existing
bank. This facility expires in April 2001 and provides for maximum borrowings
and letters of credit equal to the lesser of Pound Sterling 10.0 million
(approximately US$16.5 million) or Caratti's borrowing base associated with
accounts receivable and inventories, as defined in the agreement. The interest
rate on the facility was 9.31% at June 30, 1998.

In connection with the extension of the domestic facility, the Company's
separate revolving credit facilities for Riteway France and Riteway Japan were
also extended to April 2001 and the maximum borrowings under each facility were
increased to $4.0 million.


                                       11
<PAGE>   12

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 June 30, 1998.

The Company's operating activities provided cash of $8.4 million and $12.9
million in the six months ended June 30, 1998 and 1997, respectively. This $4.5
million decrease is primarily related to a difference in receivables, which
decreased by $4.6 million during the first six months of 1997 and increased by
$1.2 million during the first six months of 1998. The higher receivables balance
at June 30, 1998 is principally due to the $6.9 million increase in sales from
the second quarter of 1997 to the second quarter of 1998. The Company's capital
expenditures of $1.5 million in the six months ended June 30, 1998 were less
than the $5.2 million of capital expenditures in the corresponding 1997 period.
During the first six months of 1997, the Company acquired leasehold improvements
and equipment for the Company's new Santa Ana facility. In both 1998 and 1997,
excess cash was used to pay down the Company's borrowings under its revolving
bank 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
approximately 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.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). The Statement established accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. The Statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999. Application of the Statement is not expected to have a material impact on
the Company's consolidated financial position, results of operations, or
liquidity.

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.


                                       12
<PAGE>   13

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 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.

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 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 approximately the next twelve months, the
Company 


                                       13
<PAGE>   14

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. No assurance can be given that the Company would
be able to obtain such additional sources of capital on terms acceptable to the
Company.

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 and related 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 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 


                                       14
<PAGE>   15

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.


                                       15
<PAGE>   16

PART II. OTHER INFORMATION
--------------------------

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------

(a)      Exhibits
         --------

         Exhibit Number
         --------------

         10.60          Loan and Security Agreement, Dated as of April 29, 1998,
                        Among BankAmerica Business Credit, Inc. and GT Bicycles
                        California, Inc., GT Bicycles, Inc., Riteway Products
                        East, Inc. Riteway Products North Central, Inc.,
                        Rite-Way Distributors Central, Inc. and Rite-Way
                        Distributors, Inc.

         10.61          Third Amended and Restated Credit Agreement (Receivables
                        and Inventory) Entered into as of April 29, 1998 among
                        Bank of America National Trust and Savings Association
                        and GT Bicycles California, Inc., Riteway Products East,
                        Inc. Riteway Products North Central, Inc., Rite-Way
                        Distributors Central, Inc. Rite-Way Distributors, Inc.
                        and GT Bicycles, Inc.

         10.62          Working Capital Management Account Agreement No.
                        230-07C17, Dated as of April 20, 1998, between GT
                        Bicycles, Inc. and Merrill Lynch Business Financial
                        Services Inc.

         10.63          Amendment, Dated April 30, 1998, to Working Capital
                        Management Account Agreement No. 230-07C17, Dated as of
                        April 20, 1998, between GT Bicycles, Inc. and Merrill
                        Lynch Business Financial Services Inc.

         10.64          First Supplemental Agreement made on June 30, 1998
                        between Caratti Sport Limited and Bank of America
                        National Trust and Savings Association, Amending and
                        Restating the Multicurrency Credit Facilities Agreement
                        Dated September 18, 1996.

         27.1           Financial data schedule


(b)      Reports on Form 8-K
         -------------------

         During the quarter ended June 30, 1998, the Company filed a Form 8-K
         dated June 22, 1998 regarding the Company's agreement to be acquired by
         Schwinn Holdings Corporation.


                                       16
<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:   August 18, 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
                                  -------------

<TABLE>
<CAPTION>
         Exhibit 
         Number         Description
         ------         -----------
<C>                     <S>
         10.60          Loan and Security Agreement, Dated as of April 29, 1998,
                        Among BankAmerica Business Credit, Inc. and GT Bicycles
                        California, Inc., GT Bicycles, Inc., Riteway Products
                        East, Inc. Riteway Products North Central, Inc.,
                        Rite-Way Distributors Central, Inc. and Rite-Way
                        Distributors, Inc.

         10.61          Third Amended and Restated Credit Agreement (Receivables
                        and Inventory) Entered into as of April 29, 1998 among
                        Bank of America National Trust and Savings Association
                        and GT Bicycles California, Inc., Riteway Products East,
                        Inc. Riteway Products North Central, Inc., Rite-Way
                        Distributors Central, Inc. Rite-Way Distributors, Inc.
                        and GT Bicycles, Inc.

         10.62          Working Capital Management Account Agreement No.
                        230-07C17, Dated as of April 20, 1998, between GT
                        Bicycles, Inc. and Merrill Lynch Business Financial
                        Services Inc.

         10.63          Amendment, Dated April 30, 1998, to Working Capital
                        Management Account Agreement No. 230-07C17, Dated as of
                        April 20, 1998, between GT Bicycles, Inc. and Merrill
                        Lynch Business Financial Services Inc.

         10.64          First Supplemental Agreement made on June 30, 1998
                        between Caratti Sport Limited and Bank of America
                        National Trust and Savings Association, Amending and
                        Restating the Multicurrency Credit Facilities Agreement
                        Dated September 18, 1996.

         27.1           Financial data schedule
</TABLE>