<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


   (Mark One)
      [ X ]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended                 September 28, 1996


                                       OR

     [    ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to
                              --------------------   -----------------------

Commission file number                           0 - 19596


                             SLM INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

                Delaware                                       13-36-32297
     (State or other jurisdiction of                          (IRS Employer
     incorporation or organization)                        Identification No.)

   30 ROCKEFELLER PLAZA, SUITE 4314, NEW YORK, NEW YORK     10112-4399
         (Address of principal executive offices)            (Zip code)

Registrant's telephone number, including area code            212-332-1610

         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 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
                               ----                      ----

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

           Class                         Outstanding at November 25, 1996
       Common Stock,                                18,859,679
      $.01 par value
<PAGE>   2
                             SLM INTERNATIONAL, INC.
                                    FORM 10-Q

                                      INDEX


                                                                        PAGE NO.
                                                                        -------
Part I     Financial Information

Item 1.    Financial Statements

           Unaudited Consolidated Statements of Operations
           for the Three Months and Nine Months Ended
           September 28, 1996 and September 30, 1995                      1

           Unaudited Consolidated Balance Sheets at
           September 28, 1996 and December 31, 1995                       2

           Unaudited Consolidated Statements of Cash
           Flows for the Nine Months Ended September 28, 1996
           and September 30, 1995                                         3

           Notes to Unaudited Consolidated Financial Statements           4


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

Part II    Other Information

Item 1.    Legal Proceedings                                             15


Item 5.    Other Information                                             15


Item 6.    Exhibits and Reports on Form 8-K                              15
<PAGE>   3
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                      For the Three Months Ended             For the Nine Months Ended
                                                  Sept. 28, 1996     Sept. 30, 1995      Sept. 28, 1996     Sept. 30, 1995
                                                 -----------------  ------------------  -----------------  ------------------
<S>                                                <C>                 <C>                 <C>                <C>
Net sales                                           $     44,930        $     57,714        $    104,645        $    126,665
Cost of goods sold                                        29,820              38,600              67,476              82,384

                                                    ------------        ------------        ------------        ------------
     Gross profit                                         15,110              19,114              37,169              44,281
Selling, general and administrative expenses
                                                          11,989              17,410              33,217              43,428
Unusual charges (see Note 5)                               2,488                --                 2,488               7,000
                                                    ------------        ------------        ------------        ------------
     Operating income (loss)                                 633               1,704               1,464              (6,147)
Debt related fees (see Note 6)                             2,085               3,243               5,711               8,520
Other expense (income), net                                  (74)                137                 (37)                293
Interest expense                                           3,160               6,093               9,440              12,403
                                                    ------------        ------------        ------------        ------------
     (Loss) from continuing operations before
       income taxes                                       (4,538)             (7,769)            (13,650)            (27,363)
Income taxes                                                --                  --                  --                  --
                                                    ------------        ------------        ------------        ------------
     (Loss) from continuing operations                    (4,538)             (7,769)            (13,650)            (27,363)
(Loss) from disposition of discontinued
   operations, net of income taxes of nil
   (see Note 4)                                             --                  --                  --               (25,569)
                                                    ------------        ------------        ------------        ------------

     Net (loss)                                     $     (4,538)       $     (7,769)       $    (13,650)       $    (52,932)
                                                    ============        ============        ============        ============
(Loss) per share from continuing operations         $      (0.24)       $      (0.41)       $      (0.72)       $      (1.45)
(Loss) per share from disposition of
   discontinued operations                                  --                  --                  --                 (1.36)

                                                    ============        ============        ============        ============
     Net (loss) per share                           $      (0.24)       $      (0.41)       $      (0.72)       $      (2.81)

                                                    ============        ============        ============        ============
Average shares outstanding                            18,859,679          18,859,679          18,859,679          18,859,679
                                                    ============        ============        ============        ============
</TABLE>




   The accompanying notes are an integral part of the unaudited consolidated
                             financial statements.
<PAGE>   4
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                        Sept. 28, 1996        Dec. 31, 1995
                                                        ----------------    ---------------
<S>                                                       <C>              <C>
ASSETS
CURRENT ASSETS
Cash                                                       $   8,917        $  18,605
Accounts receivable, net                                      53,090           41,346
Inventories                                                   45,154           50,898
Prepaid expenses and other assets                              6,279            3,704
Net assets of discontinued operations                          3,039            9,856
                                                           ---------        ---------
       Total current assets                                  116,479          124,409
Property, plant and equipment, net                            12,974           13,496
Other assets                                                      76              123
                                                           ---------        ---------
       Total assets                                        $ 129,529        $ 138,028
                                                           =========        =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Short-term debt                                            $    --          $    --
Accounts payable and accrued liabilities                      13,026           13,083
Long-term debt, current portion                                  444              702
Income taxes payable                                             198              536
                                                           ---------        ---------
       Total current liabilities                              13,668           14,321
Liabilities subject to compromise under
    reorganization proceedings                               207,595          201,814
Other liabilities                                                535              535
                                                           ---------        ---------
       Total liabilities                                     221,798          216,670
                                                           ---------        ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' (DEFICIT)
Common stock                                                     189              189
Additional paid-in capital                                    88,564           88,564
Retained (deficit)                                          (177,219)        (163,569)
Foreign currency translation adjustments                      (3,803)          (3,826)
                                                           ---------        ---------
       Total stockholders' (deficit)                         (92,269)         (78,642)
                                                           ---------        ---------

       Total liabilities and stockholders' (deficit)       $ 129,529        $ 138,028
                                                           =========        =========
</TABLE>




   The accompanying notes are an integral part of the unaudited consolidated
                             financial statements.


                                       2
<PAGE>   5
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                               For the Nine Months Ended
                                                                           Sept. 28, 1996     Sept. 30, 1995
                                                                           --------------     --------------
<S>                                                                          <C>             <C>
OPERATING ACTIVITIES:
Net (loss)                                                                    $(13,650)       $(52,932)
Adjustments to reconcile net (loss) to net cash
     used in operating activities:
       Loss from disposition of discontinued operations                                         25,569
       Litigation settlement                                                                     7,000
       Depreciation and amortization                                             2,071           2,572
       Provisions for inventory, doubtful accounts and other deductions         11,493          15,436
       Gain on sale and disposal of fixed assets                                   (19)           --
       Loss on foreign exchange                                                     13             264
Change in operating assets and liabilities:
       Accounts receivable                                                     (19,306)        (23,572)
       Inventories                                                               1,972           5,793
       Prepaid expenses and other assets                                        (2,570)          1,940
       Accounts payable and accrued liabilities                                    974          (6,889)
       Interest payable                                                          9,325           1,434
       Other                                                                         8             (26)
       Discontinued operations                                                   6,817           5,005
                                                                              --------        --------
           Net cash used in operating activities                                (2,872)        (18,406)
                                                                              --------        --------

INVESTING ACTIVITIES:
       Purchases of fixed assets                                                (1,771)         (2,031)
       Proceeds from sales of fixed assets                                         293              88
                                                                              --------        --------
           Net cash used in investing activities                                (1,478)         (1,943)
                                                                              --------        --------
FINANCING ACTIVITIES:
       Proceeds from borrowings                                                   --            14,252
       Principal payments on debt                                               (5,342)           (841)
                                                                              --------        --------
           Net cash (used in) provided by financing activities                  (5,342)         13,411
                                                                              --------        --------
Effects of foreign exchange rate changes on cash                                     4             127
                                                                              --------        --------
Decrease in cash                                                                (9,688)         (6,811)

Cash at beginning of period                                                     18,605           8,344
                                                                              --------        --------
Cash at end of period                                                         $  8,917        $  1,533
                                                                              ========        ========
</TABLE>


   The accompanying notes are an integral part of the unaudited consolidated
                             financial statements.


                                       3
<PAGE>   6
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

1.  BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements appearing
in this quarterly report have been prepared on a basis consistent with the
annual financial statements of SLM International, Inc. and subsidiaries (the
"Company"). SLM International, Inc. and six of its subsidiaries (collectively,
the "Debtors") filed voluntary petitions for relief under Chapter 11 of the
United States Bankruptcy Code (the "Filing") in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court") on October 24, 1995
(the "Petition Date"). The Company and those subsidiaries are presently
operating their businesses in the ordinary course as debtors-in-possession
subject to the jurisdiction of the Bankruptcy Court. The Bankruptcy Court has
entered an order authorizing the joint administration of the Debtors' Chapter 11
cases (the "Chapter 11 Cases") (see Note 2). On September 12, 1996, the Debtors
filed a Chapter 11 Plan of Reorganization and on November 13, 1996, the Debtors
filed a First Amended Chapter 11 Plan of Reorganization as amended from time to
time (the "Reorganization Plan") with the Bankruptcy Court.

The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles applicable
to a going concern which, except as otherwise disclosed, assumes that assets
will be realized and liabilities will be discharged in the normal course of
business, and do not include any adjustments which might result from the outcome
of the Chapter 11 Cases.

If the Reorganization Plan is confirmed, the Company will be required to account
for such Reorganization Plan using "fresh start" reporting. Accordingly, all
assets and liabilities would be restated to approximate fair value at the date
of reorganization and any excess in reorganizational value over market value of
identifiable assets would be recorded as an intangible asset. If the
Reorganization Plan described below is confirmed, the Company would record an
extraordinary gain from reorganization, a decrease in debt and an increase in
equity. In addition, existing shareholders would no longer hold common stock
interests in the Debtors but would hold warrants to purchase common stock which
would result in severely diluted equity holdings as compared to their current
holdings.

In the opinion of management, all normal recurring adjustments necessary for a
fair presentation of the Company's Unaudited Consolidated Statements of
Operations, Balance Sheets and Statements of Cash Flows for the interim period
in 1996 and the corresponding period in 1995 have been included. These unaudited
interim consolidated financial statements do not include all of the information
and footnotes required by generally accepted accounting principles to be
included in a full set of financial statements. Results for the interim period
are not necessarily a basis from which to project results for the full year due
to the seasonality of the Company's business and the Filing. These unaudited
consolidated financial statements should be read in conjunction with the
Company's annual report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1995. Certain prior period amounts
have been reclassified to conform to the current year presentation.

Cash consists of cash and highly liquid short-term investments with original
maturities of three months or less. The Company invests excess funds in
reverse-repurchase agreements with Fleet Credit Corporation ("Fleet"). At
September 28, 1996, the Company had $5,811 invested in U.S. Government backed
securities under agreements to resell on dates through October 2, 1996. Due to
the short-term nature of these investments, the Company did not take physical
possession of the securities, which were instead held in Fleet's safe keeping
account at the Federal Reserve, their Trust Department or vault. The Company
believes it is not exposed to any significant credit risk on cash equivalents.

2.  REORGANIZATION CASE

In the Chapter 11 Cases, substantially all liabilities as of the Petition Date
are subject to resolution under the Reorganization Plan to be voted upon by the
Company's creditors and stockholders and confirmed by the Bankruptcy Court.
Schedules have been filed by the Company with the Bankruptcy Court setting forth
its assets and liabilities as of the Petition Date as shown by its accounting
records. Differences between amounts shown by the Company and claims filed by
creditors, including claims in excess of what the Company has previously
accrued, will be investigated and resolved. The ultimate amount and settlement
terms for such liabilities are subject to the Reorganization Plan.

Under the Bankruptcy Code, the Company may elect to assume or reject leases,
employment contracts, service contracts and other executory pre-Petition Date
contracts, subject to Bankruptcy Court approval. The Company


                                       4
<PAGE>   7
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

cannot presently determine or reasonably estimate the ultimate liability which
may result from the filing of claims for any rejected contracts, and no
provisions have yet been made for these items.

Since October 1, 1994, the Company has not been in compliance with certain
financial and other covenants in its principal financing agreements, including
those with its banks and with the holders of the Company's 6.76% senior notes
(the "Senior Noteholders") which would allow these lenders to accelerate
repayment of these loans. However, as a result of the Filing, no principal or
interest payments will be made on any pre-Petition Date debt without Bankruptcy
Court approval or until a reorganization plan defining the repayment terms has
been confirmed.

The Bankruptcy Court has authorized the Company to use the cash generated by its
operations to continue to fund its business obligations, and to pay pre-Petition
Date wages, salaries, sales commissions, employee benefits and customs duties,
honor manufacturer's warranties and pay certain non-U.S. pre-Petition Date
liabilities. These various Bankruptcy Court authorizations provide the Company
with cash and liquidity so that it can conduct its operations. Until a
reorganization plan is confirmed, the Company expects to continue to fund its
working capital and capital expenditures requirements through either cash
generated by its operations or through credit facilities as necessary. However,
there can be no assurance that the Company will be able to obtain such credit
facilities or, if obtained, that such facilities will be sufficient to enable
the Company to meet its liquidity requirements. Upon confirmation of a
reorganization plan, the reorganized Company (the "Reorganized Company") expects
to meet its working capital and capital expenditures requirements through a
secured credit facility for which the Company has received commitments from
three prospective lenders. Such commitments are contingent upon, among other
things, confirmation of the Reorganization Plan.

On June 26, 1996, the Debtors announced that they entered into an agreement with
representatives of the Debtors' Senior Noteholders and trade and other unsecured
creditors (the "Unsecured Creditors Committee") on a term sheet (the "Term
Sheet") setting forth the material provisions of a Reorganization Plan.
Thereafter, the Debtors and the Unsecured Creditors Committee reached an
agreement in principle with assignees of the Debtors' former lenders (the
"Secured Creditor Group") on the terms of the Reorganization Plan. On September
12, 1996, the Debtors filed with the Court a proposed Chapter 11 Plan of
Reorganization (the "Proposed Plan"). On September 19, 1996 the Debtors filed
with the Court a Disclosure Statement Pursuant to Section 1125 of the Bankruptcy
Code incident to the Proposed Plan. After further negotiations and term
modifications among the Debtors and their creditor constituencies, on November
13, 1996 the Debtors filed with the Court the Reorganization Plan and the First
Amended Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code
incident to the Reorganization Plan. On November 19, 1996 the Bankruptcy Court
approved the adequacy of the First Amended Disclosure Statement as modified in
open court (the "Disclosure Statement"). The Reorganization Plan represents the
culmination of management analyses and negotiation amongst representatives of
principal parties in interest regarding the best means to maximize and to
allocate value to the Debtors' creditors and stockholders in accordance with
their legal and contractual rights and priorities with due regard to the
potential causes of action and claims that could be asserted against and by
certain creditors.

Under the Reorganization Plan, among other things:

 -   The Debtors' secured creditors will receive $73,973 in cash and new senior
     secured notes (the "New Senior Secured Notes") and 2,470,000 shares of new
     common stock (the "New Common Stock") of the Reorganized Company, in
     exchange for approximately $108,000 of secured and unsecured indebtedness
     (which amount includes the secured creditors estimate of post-filing
     interest and expenses). The 2,470,000 shares of New Common Stock,
     represents (before dilution) 38.0% of the ownership of the Reorganized
     Company. The New Senior Secured Notes will have a term of seven years with
     principal payment beginning in the fifth year after the Reorganization Plan
     becomes effective (the "Effective Date"). Interest thereon is due and
     payable semi-annually at 14.0% (including 4.0% payable in kind ("PIK"),
     with such PIK interest reduced permanently if the Company achieves
     certain earnings levels established in the Reorganization Plan). The New
     Senior Secured Notes are pre-payable at 101% of principal plus accrued
     interest, will be secured by a lien on substantially all of the Company's
     assets, subordinate only to the Company's new secured credit facility, and
     will have covenants, representations and other terms customary in
     instruments of this nature.

 -   The Debtors' unsecured creditors will receive 4,030,000 shares of New
     Common Stock representing, at the time of issuance, 62.0% of the
     distributed equity in the Reorganized Company, subject to dilution upon the


                                       5
<PAGE>   8
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

     exercise of warrants distributed to equity security holders and stock
     options held by the Company's Chief Executive Officer (up to 10.0% of the
     common stock at varying exercise prices), in exchange for approximately
     $120,000 of unsecured indebtedness. It is presumed that the New Common
     Stock will have an initial value of $10.16 per share.

 -   The Company's equity security holders (currently holding 18,859,679 shares
     of Common Stock) will receive a total of 300,000 5-year warrants to
     purchase an aggregate of 300,000 shares of New Common Stock currently
     expected to be at an exercise price above the initial value of the New
     Common Stock. The warrants would be exercisable at an enterprise valuation
     of $175,000; based on a presumed initial value of $10.16 per share, this
     would be an exercise price of approximately $17.00 per share. In addition,
     the warrant holders will have the option to receive an aggregate payment of
     $500 upon cancellation of such warrants in connection with a sale of the
     Company for more than $140,000.

The Reorganization Plan, which is predicated upon an estimated Company valuation
of $130,000, exclusive of cash for distribution thereunder, also provides for
other terms including: structured settlements with Fleet Credit Corporation (in
connection with its claims arising from equipment financing) and NHL
Enterprises, Inc. and its affiliates (in connection with their claims arising
from royalty obligations under licenses with the Company and alleged
infringement of their property); the incorporated consent decree entered in
Vermont Superior Court by agreement with Maska U.S., Inc. ("Maska"); an overall
structured settlement among and between all of the creditor classes which
results in, among other things, the recoveries described above for the secured
creditors and unsecured creditors collectively as well as an intra-creditor
structured recovery resulting in the Senior Noteholders realizing approximately
40.9% on their claims, Maska's unsecured creditors realizing approximately 56.6%
on their claims and the unsecured creditors of the other Debtors realizing
approximately 31.9% on their claims; and the creation of a new 5-member Board of
Directors (consisting of the then Chief Executive Officer, two directors
selected by the Unsecured Creditors Committee and two directors selected by the
Secured Creditors Group). A hearing on the adequacy of the Disclosure Statement
was held on November 19, 1996, at which the Bankruptcy Court approved the
adequacy of the Disclosure Statement and authorized its distribution to the
creditors and stockholders for voting on the Reorganization Plan. The
effectiveness of the Reorganization Plan is subject to, among other things, a
creditor and equity security holder vote on such plan and Bankruptcy Court
approval of such plan based upon legal criteria set forth in the Bankruptcy
Code. Confirmation currently is scheduled for January 23, 1997 but may be
postponed unless the Reorganization Plan is accepted by voting constituencies
and the approval of such plan is not subject to material opposition. The
Company, therefore, is not presently able to predict with certainty when the
Chapter 11 Cases will be concluded or on what basis.

3.  LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION PROCEEDINGS

Substantially all of the Company's liabilities as of the Petition Date are
subject to settlement under the Reorganization Plan. The Company is generally
not permitted to make payments with respect to its pre-Petition Date liabilities
until the Reorganization Plan has been confirmed by the Bankruptcy Court.

Liabilities subject to compromise under reorganization proceedings consisted of:

<TABLE>
<CAPTION>
                                         Sept. 28, 1996    Dec. 31, 1995
                                         --------------    -------------
<S>                                         <C>            <C>

Priority Claims                              $    605       $    605
Secured Debt
       Principal                               95,792        100,876
       Interest                                12,838          3,513
General Unsecured Claims                       13,695         12,155
Unsecured Debt, Principal and Interest         84,665         84,665
                                             --------       --------
                                             $207,595       $201,814
                                             ========       ========
</TABLE>



Priority claims, the repayment of which the Company is required to prioritize
under bankruptcy law, are comprised principally of income and property tax
claims. Unsecured debt includes amounts which may ultimately be deemed secured.
It is not practicable to estimate the fair value of the Company's liabilities
subject to compromise under reorganization proceedings.

During the reorganization proceedings the Company is generally not permitted to
pay interest. During such time, the Company will record interest expense only to
the extent paid or earned during the proceedings and to


                                       6
<PAGE>   9
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

the extent it is probable that the Bankruptcy Court will allow interest on
pre-Petition Date debt as a priority, secured or unsecured claim. The excess of
contractual interest expense over recorded interest expense for the year ended
December 31, 1995 and through the nine months ended September 28, 1996 was
approximately $2,100 and $13,300, respectively, and $3,700 for the three months
ended September 28, 1996.

4.  DISCONTINUED OPERATIONS


In December 1994, the Company determined that it would hold its investments in
its Buddy L toy and fitness businesses for sale. Accordingly, the results of
operations of these businesses have been accounted for as discontinued
operations for all periods in the accompanying unaudited consolidated financial
statements. On March 2, 1995, Buddy L Inc. filed for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
District of Delaware. As a result of the finalization of the sale of the Buddy L
toy and fitness businesses, the terms of which changed substantially from those
previously proposed; a change in the anticipated distribution of the sale
proceeds amongst the various creditors and the liquidation of the remaining
Buddy L assets (primarily accounts receivable and real property); and an
increase in estimated phase out costs, an additional loss from disposition of
discontinued operations of $25,569 was recorded during the nine months ended
September 30, 1995. Net assets of discontinued operations of $3,039 at September
28, 1996 and $9,856 at December 31, 1995, consisted primarily of accounts
receivable and real property.


On December 19, 1995, the Bankruptcy Court approved a settlement agreement (the
"Settlement Agreement") in the Smedley Industries, Inc. (f/k/a Buddy L Inc.)
("Smedley") Chapter 11 case among the Company, Smedley, its creditors and the
Company's banks and Senior Noteholders, resolving the allocation of the proceeds
and expenses from the disposition of the Buddy L toy and fitness businesses. A
Chapter 11 plan and a disclosure statement for Smedley were filed and
subsequently amended with the Bankruptcy Court embodying the terms of the
Settlement Agreement. The Chapter 11 plan, as amended, was confirmed by the
Court on October 3, 1996 and became effective on October 17, 1996.

5.  UNUSUAL CHARGES

During the three and nine months ended September 28, 1996, the Company recorded
significant unusual charges in continuing operations totaling $2,488 to reflect
the impact of reorganizing management strategically to position itself for a
definitive restructuring plan. These costs consist primarily of severance pay,
including that of the Company's former Chief Executive Officer, who was relieved
of his position in September 1996. During the nine months ended September 30,
1995, the Company recorded significant unusual charges totaling $7,000 due to
the settlement of certain environmental litigation (see Note 8). The unusual
charges represented 18.2% and 25.6% of the Company's loss from continuing
operations for the nine months ended September 28, 1996 and September 30, 1995,
respectively, and 54.8% for the three months ended September 28, 1996.

6.  DEBT RELATED FEES AND DEFAULT INTEREST

As a result of the Company's significant losses in the year ended December 31,
1994, the resultant non-compliance with covenants in its various financing
agreements, the involuntary bankruptcy action initiated by its Senior
Noteholders, the Standstill Agreements with its lenders and the Filing, the
Company's continuing operations incurred significant legal and professional fees
totaling $2,085 and $3,243 for the three months ended and $5,711 and $8,520 for
the nine months ended September 28, 1996 and September 30, 1995, respectively.
These fees include the cost of the Company's legal counsellors, financial
advisors and consultants, as well as those of its bankers, Senior Noteholders
and creditors and, additionally, 1995 included certain payments made directly to
these lenders. The debt related fees for the three months and nine months ended
September 28, 1996 are net of $208 and $530, respectively, of interest earned on
accumulated cash resulting from the Filing. These costs are included as Debt
Related Fees in the Unaudited Consolidated Statement of Operations for the
periods then ended. It is anticipated that additional significant reorganization
related fees will be incurred in future periods.

Additionally, as a result of the Company's defaults under its financing
agreements, its financial condition and the terms of the Standstill Agreements,
since February 1995 the Company was charged an additional 3.0% interest on its
bank debt and the interest rate on its 6.76% senior notes was increased to 15%.
These higher interest rates resulted in incremental interest expense of $796 and
$2,399 for the three months ended and $2,350 and $4,315 for the nine months
ended September 28, 1996 and September 30, 1995, respectively, which is included
in Interest Expense in the Unaudited Consolidated Statements of Operations.


                                       7
<PAGE>   10
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

The debt related fees and default interest costs represent 63.5% and 72.6% of
the Company's loss from continuing operations for the three months ended
September 28, 1996 and September 30, 1995, respectively, and 59.1% and 46.9% for
the nine months then ended.

7.  INVENTORIES
Inventories consist of:

<TABLE>
<CAPTION>
                                                              Sept. 28, 1996    Dec. 31, 1995
                                                              --------------    -------------
<S>                                                                 <C>              <C>
       Finished products                                             $35,889          $38,948
       Work in process                                                 2,585            4,143
       Raw materials and supplies                                      6,680            7,807
                                                                     -------          -------
                                                                     $45,154          $50,898
                                                                     =======          =======
</TABLE>

                                                                             
8.  CONTINGENCIES AND LITIGATION

Under Section 362 of the Bankruptcy Code, the Company's filing of a Chapter 11
petition, among other things, operates as an automatic stay of the commencement
or continuation of any legal action against the Company or any act to enforce a
lien on its property with respect to claims that arose prior to the commencement
of the Chapter 11 Cases. Accordingly, pending litigation against the Company and
its subsidiaries arising from pre-Petition Date claims has been stayed by reason
of the Filing in accordance with the Bankruptcy Code, unless and until the stay
is lifted with respect to a particular case.

 A. PRODUCT LIABILITY:

Certain subsidiaries of the Company are defendants in a personal injury action
which was filed in the United States District Court for the District of
Massachusetts in 1989 involving a spinal injury incurred by the plaintiff while
wearing a hockey helmet purported to have been manufactured or sold by such
subsidiaries. In view of the Filing, the Court dismissed the case without
prejudice to either party moving to restore it to the docket upon final
determination of the bankruptcy proceedings. The plaintiff seeks damages related
to his quadriplegia consisting of approximately $6,300 for economic loss and
long-term medical and health care costs and $2,700 for, among other things, pain
and suffering. The plaintiff has further asserted a claim under Massachusetts
General Laws, Chapter 93A, for breach of warranty, including a claim for treble
damages for any and all loss. In furtherance of the foregoing, the plaintiff has
asserted a $10,000 contingent unsecured claim in the Chapter 11 Cases. This
claim has not yet been resolved. The plaintiff has requested relief from the
automatic stay in the Chapter 11 proceedings to permit the liquidation of his
claim. The Company has insurance coverage of approximately $400 plus the
substantial portion of legal costs for this action. Based on the facts of this
case, the Company believes that it has meritorious defenses to the claims.
However, an adverse outcome of this matter could have a materially adverse
effect on the reorganization of the Company and on its financial condition. The
Company has not provided for any loss in its consolidated financial statements
which might result from this litigation.

The Company is also a defendant in other product liability suits for personal
injuries. The Company believes that any resulting losses and defense costs will
be within applicable insurance coverage and the Company's provision for such
losses and costs.

B.       ENVIRONMENTAL MATTERS:

In 1991, the Vermont Department of Environmental Conservation ("VIDEC") notified
the Company that the Bradford, Vermont property operated by its wholly-owned
subsidiary, Maska, had been included on the U.S. Environmental Protection
Agency's Comprehensive Environmental Response, Compensation and Liability
Information System and the Vermont Hazardous Sites List and was being evaluated
for possible remedial action. During April 1996, Maska and the State of Vermont
entered into a Joint Pleading and Stipulation which sets forth the elements of
the State of Vermont's claims against Maska pertaining to the releases of
contaminants ("Releases") into the groundwater and soil at the Bradford site and
also sets forth the compromise and settlement of those claims in the form of a
Consent Decree incorporated therein. The Consent Decree provides that Maska
shall remediate the Releases in accordance with approved workplans, reimburse
the State for its costs to oversee the remediation and pay a civil penalty of
$250. The Consent Decree was approved by the Bankruptcy Court on May 14, 1996
and entered by the Washington County Superior Court of the State of Vermont on
June 10, 1996. In July 1996, the Company paid the State of Vermont their
oversight costs to

                                       8
<PAGE>   11
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

date and the civil penalty in accordance with the Consent Decree. The Company
had previously accrued approximately $250 related to the Consent Decree.

Maska has undertaken its own investigation to determine the extent of
contamination, the rate of movement and the concentration of the contaminants,
the appropriate action required for site remediation and the identification of
other parties who should bear a share of the costs of remediation. Maska may
seek recovery against the former owners of its Bradford property and facility
and certain of their affiliated companies for the costs of such investigation,
remediation and the settlement with the adjacent property owner discussed below.
In addition, Maska has brought suit against certain of its insurance carriers
for their failure to defend or indemnify Maska with respect to these claims. It
is uncertain at this time whether the prior owner or the Company's insurers will
bear their share of the costs and any damages.

While the total cost of investigation and remediation cannot be determined until
the investigation required by VTDEC is complete and the extent of Maska's
remedial obligations has been determined, the Company believes that it is
reasonably possible that these costs will be in a range of $1,000 to $2,000. The
Company has previously accrued approximately $1,400 toward these costs, which
includes capital costs and operating, maintenance and monitoring costs over a
period of up to 30 years after construction of the remedy.

While the Company believes that other parties, including insurers, may be liable
for some or all of these costs, there can be no assurance that these parties
will bear these costs and therefore the Company has not assumed any recovery
from such third parties in estimating its potential liabilities. Based on
information available to the Company at this time, an outcome other than
anticipated for Maska's obligations for site remediation could have a materially
adverse effect on the financial condition of the Company.

In 1992, the owner of a property adjacent to Maska's manufacturing facility in
Bradford, Vermont, filed an action in Vermont Superior Court alleging that its
property has been contaminated as a result of the Company's manufacturing
activities and seeking compensatory and punitive damages under the Vermont
Groundwater Protection Law and various common law theories. During June 1995,
Maska reached a settlement of all claims with the adjacent landowner consisting
of $1,000 cash (which was paid during July 1995) and a $6,000 note bearing
interest at 10% payable over five years based on a twenty year amortization with
the balance of principal payable in June 2000. The Company recorded a provision
of $7,000 for this settlement during the three months ended July 1, 1995. The
Company's performance of its payment obligations under this settlement have been
stayed in accordance with 11 U.S.C. Section 362 (a) by virtue of the pendency of
the Chapter 11 Cases. Accordingly, these obligations are classified as
liabilities subject to compromise under reorganization proceedings. In addition,
the owner of another adjacent property has asserted an identical claim against
Maska in the Chapter 11 Cases. Maska believes that, for several reasons
including the lack of evidence of liability as well as Maska's remediation, this
claim is not meritorious. In any event, this claim is subject to compromise by
virtue of the Chapter 11 Cases.

C.       SECURITIES LITIGATION:

During May 1994, the Company was served with three complaints, in each case
filed in the U.S. District Court for the Southern District of New York, that
alleged violations of Sections 10(b) and 20 of the Securities Exchange Act of
1934 (the "1934 Act"). Each complaint also named as defendants certain current
and former officers and directors of the Company, sought class action status,
unspecified damages and certain fees and expenses. On July 14, 1994, the
respective plaintiffs filed a consolidated complaint that was purportedly
brought on behalf of all purchasers of the Company's common stock between July
12, 1993 and April 15, 1994. The defendants stipulated to certification of the
purported class for procedural purposes. On August 3, 1994, the Company and
other defendants filed a motion to dismiss the consolidated complaint. The Court
did not rule on that motion.

In November 1994, another complaint was filed in the U.S. District Court for the
Southern District of New York, which was purportedly brought on behalf of all
purchasers of the Company's common stock between May 2, 1994 and November 15,
1994. The complaint named as defendants the Company and certain current and
former officers and directors, and alleged violations of Section 10(b) and 20 of
the 1934 Act. The plaintiff in that complaint, the plaintiffs in the
consolidated complaint, and two additional plaintiffs together filed a second
consolidated complaint on January 5, 1995. The second consolidated complaint was
purportedly brought on behalf of all purchasers of the Company's common stock
between July 12, 1993 and November 21, 1994; named as


                                       9
<PAGE>   12
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                        (In thousands, except share data)

defendants the Company and certain current and former officers and directors;
alleged violations of Sections 10(b) and 20 of the 1934 Act; sought class action
status; unspecified damages, and certain fees and expenses. The Company and
individual defendants filed an answer to the second consolidated complaint,
which denied all substantive allegations.

On February 14, 1996, the Company, together with certain of its former and
present officers and directors, reached a settlement with the plaintiffs in this
litigation. The settlement provides for the cash payment by the Company's
insurer of $8,750, on behalf of certain former and present officers and
directors of the Company who are defendants. In addition, the Company will issue
1,000,000 shares of its Common Stock. During July 1996, the settlement was
approved by the Bankruptcy Court and the U.S. District Court for the Southern
District of New York. Additionally, during August 1996 certain of the Company's
creditors filed an appeal with the Bankruptcy Court with respect to the
Bankruptcy Court's approval of the settlement which has not yet been resolved
but will be dismissed with prejudice in connection with the Reorganization Plan.
As a result of the settlement, the Company recorded a provision of approximately
$1,563 (the market value of 1,000,000 shares of common stock on the date the
settlement was agreed to) in the year ended December 31, 1995.

Other than certain legal proceedings arising from the ordinary course of
business, which the Company believes will not have a material adverse impact on
the results of operations, there is no other litigation pending or threatened
against the Company.


                                       10
<PAGE>   13
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


 
INTRODUCTION

On October 24, 1995, SLM International, Inc. and six of its subsidiaries filed
for relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. The Company and those
subsidiaries chose to seek court protection from creditors in order to conduct
their operations while preparing a reorganization plan. The Bankruptcy Court has
authorized the Company to use the cash generated by its operations to continue
to fund its business obligations. While the Company attempted, and would have
preferred, to reorganize outside of a bankruptcy court proceeding, the Company
viewed the Filing as the most viable alternative available given the adverse
impact on the businesses of inadequate liquidity. Nevertheless, disruptions that
occurred prior to and which may have been or may be caused by the Filing will
affect the Company's operating performance for a given period and could continue
to affect the Company's results throughout 1996.

On June 26, 1996, the Debtors announced that they entered into an agreement with
representatives of the Debtors' Senior Noteholders and trade and other unsecured
creditors (the "Unsecured Creditors Committee") on a term sheet (the "Term
Sheet") setting forth the material provisions of a Reorganization Plan.
Thereafter, the Debtors and the Unsecured Creditors Committee reached an
agreement in principle with assignees of the Debtors' former lenders (the
"Secured Creditor Group") on the terms of the Reorganization Plan. On September
12, 1996, the Debtors filed with the Court a proposed Chapter 11 Plan of
Reorganization (the "Proposed Plan"). On September 19, 1996 the Debtors filed
with the Court a Disclosure Statement Pursuant to Section 1125 of the Bankruptcy
Code incident to the Proposed Plan. After further negotiations and term
modifications among the Debtors and their creditor constituencies, on November
13, 1996 the Debtors filed with the Court a First Amended Chapter 11 Plan of
Reorganization as amended from time to time (the "Reorganization Plan") and the
First Amended Disclosure Statement Pursuant to Section 1125 of the Bankruptcy
Code incident to the Reorganization Plan. On November 19, 1996 the Bankruptcy
Court approved the adequacy of the First Amended Disclosure Statement as
modified in open court (the "Disclosure Statement"). The Reorganization Plan
represents the culmination of management analyses and negotiation amongst
representatives of principal parties in interest regarding the best means to
maximize and to allocate value to the Debtors' creditors and stockholders in
accordance with their legal and contractual rights and priorities with due
regard to the potential causes of action and claims that could be asserted
against and by certain creditors.

Under the Reorganization Plan, among other things:

-    The Debtors' secured creditors will receive $74.0 million in cash and new
     senior secured notes (the "New Senior Secured Notes") and 2,470,000 shares
     of new common stock (the "New Common Stock") of the reorganized Company
     (the "Reorganized Company"), in exchange for approximately $108.0 million
     of secured and unsecured indebtedness (which amount includes the secured
     creditors estimate of post-filing interest and expenses). The 2,470,000
     shares of New Common Stock, represents (before dilution) 38.0% of the
     ownership of the Reorganized Company. The New Senior Secured Notes will
     have a term of seven years with principal payment beginning in the fifth
     year after the Reorganization Plan becomes effective (the "Effective
     Date"). Interest thereon is due and payable semi-annually at 14.0%
     (including 4.0% payable in kind ("PIK"), with such PIK interest reduced
     permanently if the Company achieves certain earnings levels established
     in the Reorganization Plan). The New Senior Secured Notes are pre-payable
     at 101% of principal plus accrued interest, will be secured by a lien on
     substantially all of the Company's assets, subordinate only to the
     Company's new secured credit facility, and will have covenants,
     representations and other terms customary in instruments of this nature.

-    The Debtors' unsecured creditors will receive 4,030,000 shares of New
     Common Stock representing, at the time of issuance, 62.0% of the
     distributed equity in the Reorganized Company, subject to dilution upon the
     exercise of warrants distributed to equity security holders and stock
     options held by the Company's Chief Executive Officer (up to 10.0% of the
     common stock at varying exercise prices), in exchange for approximately
     $120.0 million of unsecured indebtedness. It is presumed that the New
     Common Stock will have an initial value of $10.16 per share.

-    The Company's equity security holders (currently holding 18,859,679 shares
     of Common Stock) will receive a total of 300,000 5-year warrants to
     purchase an aggregate of 300,000 shares of New Common Stock currently
     expected to be at an exercise price above the initial value of the New
     Common Stock. The warrants would be exercisable at an enterprise valuation
     of $175.0 million; based on a presumed initial


                                       11
<PAGE>   14
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    value of $10.16 per share, this would be an exercise price of
    approximately $17.00 per share. In addition, the warrant holders will have
    the option to receive an aggregate payment of $0.5 million upon
    cancellation of such warrants in connection with a sale of the Company for
    more than $140.0 million.

The Reorganization Plan, which is predicated upon an estimated Company valuation
of $130,000, exclusive of cash for distribution thereunder, also provides for
other terms including: structured settlements with Fleet Credit Corporation (in
connection with its claims arising from equipment financing) and NHL
Enterprises, Inc. and its affiliates (in connection with their claims arising
from royalty obligations under licenses with the Company and alleged
infringement of their property); the incorporated consent decree entered in
Vermont Superior Court by agreement with Maska U.S., Inc. ("Maska"); an overall
structured settlement among and between all of the creditor classes which
results in, among other things, the recoveries described above for the secured
creditors and unsecured creditors collectively as well as an intra-creditor
structured recovery resulting in the Senior Noteholders realizing approximately
40.9% on their claims, Maska's unsecured creditors realizing approximately 56.6%
on their claims and the unsecured creditors of the other Debtors realizing
approximately 31.9% on their claims; and the creation of a new 5-member Board of
Directors (consisting of the then Chief Executive Officer, two directors
selected by the Unsecured Creditors Committee and two directors selected by the
Secured Creditors Group). A hearing on the adequacy of the Disclosure Statement
was held on November 19, 1996, at which the Bankruptcy Court approved the
adequacy of the Disclosure Statement and authorized its distribution to the
creditors and stockholders for voting on the Reorganization Plan. The
effectiveness of the Reorganization Plan is subject to, among other things, a
creditor and equity security holder vote on such plan and Bankruptcy Court
approval of such plan based upon legal criteria set forth in the Bankruptcy
Code. Confirmation currently is scheduled for January 23, 1997 but may be
postponed unless the Reorganization Plan is accepted by voting constituencies
and the approval of such plan is not subject to material opposition. The
Company, therefore, is not presently able to predict with certainty when the
Chapter 11 Cases will be concluded or on what basis.

If the Reorganization Plan is confirmed, the Company will be required to account
for such Reorganization Plan using "fresh start" reporting. Accordingly, all
assets and liabilities would be restated to approximate fair value at the date
of reorganization and any excess in reorganizational value over market value of
identifiable assets would be recorded as an intangible asset. If the
Reorganization Plan described above is approved, the Company would record an
extraordinary gain from reorganization, a decrease in debt and an increase in
equity. In addition, existing shareholders would no longer hold common stock
interests in the Debtors but would hold warrants to purchase common stock which
would result in severely diluted equity holdings as compared to their current
holdings.

On March 6, 1995, the Senior Noteholders filed involuntary bankruptcy petitions
against certain of the Company's U.S. subsidiaries in the U.S. and against the
Company and certain of its Canadian subsidiaries in Canada. On March 24, 1995,
the United States Bankruptcy Court dismissed the involuntary petition filed
against two of the Company's U.S. subsidiaries (Maska and #1 Apparel, Inc.).
During June 1995, the Company entered into Standstill Agreements with its bank
lenders and Senior Noteholders that provided a period of continued financing by
its lenders, a sharing of collateral by the bank lenders and Senior Noteholders
and provided the Company a period (through December 31, 1995) in which to
restructure its debt without further judicial proceedings. Additionally, the
Company retained the investment banking firm of Bear Stearns & Co., Inc. to
assist the Company in exploring a wide variety of possible financial
transactions, including refinancing existing debt and obtaining equity capital.
In June 1995, in connection with the Standstill Agreements, the Senior
Noteholders withdrew involuntary bankruptcy filings against the Company and its
subsidiaries in Canada.

As a result of significant operating losses in its toy and fitness businesses
during 1994, the Company decided in December 1994 that it would hold its
investment in Buddy L for sale. Consequently, these businesses have been
accounted for as discontinued operations. On March 2, 1995, the Company's
wholly-owned subsidiary Buddy L Inc. filed for reorganization under Chapter 11
of the United States Bankruptcy Code. On May 9, 1995, the Company accepted the
bid to sell certain assets and liabilities of the Buddy L toy business to Empire
of Carolina, Inc. The bid was approved by the Bankruptcy Court on May 19, 1995
and the transaction closed on July 7, 1995. The court approved sale of the
fitness business was completed on June 30, 1995. For further information


                                       12
<PAGE>   15
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

concerning discontinued operations, see Note 4 to the Unaudited Consolidated
Financial Statements presented elsewhere herein.

The following discussion provides an assessment of the Company's results of
continuing operations and liquidity and capital resources and should be read in
conjunction with the Unaudited Consolidated Financial Statements of the Company
and Notes thereto included elsewhere herein. (All references to "Note(s)" are to
the Notes to Unaudited Consolidated Financial Statements).

RESULTS OF CONTINUING OPERATIONS FOR THE NINE MONTHS AND THREE MONTHS ENDED
SEPTEMBER 28, 1996 

1996 COMPARED TO 1995

Net sales decreased 17.4% to $104.6 million in the nine months ended September
28, 1996 as compared to $126.7 million in the nine months ended September 30,
1995. The decline in sales included decreases of 38.8% in in-line roller skates,
11.8% in hockey and figure skates, 13.7% in licensed sports apparel and 9.7% in
protective equipment. Net sales decreased 22.1% to $44.9 million in the three
months ended September 28, 1996 as compared to $57.7 million in the three months
ended September 30, 1995. The decline in sales included decreases of 24.0% in
hockey and figure skates, 41.3% in in-line roller skates, 17.5% in licensed
sports apparel and 15.4% in protective equipment. Compared to 1995, sales in
1996 were negatively affected by the Company's Chapter 11 status, a generally
weak retail environment in the sports and leisure products industry,
particularly in the recreational in-line skate market, increased amounts of
deeply discounted merchandise offered by other manufacturers and poor weather in
the U.S. and Canada. Furthermore, the Company has reduced the levels of business
it conducts with certain specialty retailers and mass merchandisers to whom
previous sales were made at low margins and high credit risk, and has reduced or
eliminated certain incentives to customers.

Gross profit for the nine months was $37.2 million in 1996 compared to $44.3
million in 1995, a decrease of 16.1%. Measured as a percentage of net sales,
gross profit margins increased to 35.5% in 1996 from 35.0% in 1995. Gross profit
for the three months ended September 28, 1996 was $15.1 million compared to
$19.1 million in 1995, a decrease of 20.9%. Measured as a percentage of net
sales, gross profit margins increased to 33.6% in 1996 from 33.1% in 1995. These
higher gross profit margins are principally a result of favorable customer and
product mixes as compared to 1995.

For the nine months ended September 28, 1996, selling, general and
administrative expenses decreased 23.5% to $33.2 million compared to $43.4
million in the prior year period. Measured as a percentage of net sales, these
expenses were 31.7% in 1996 versus 34.3% in 1995. Expenses decreased as a result
of generally lower operating expenses due to the Company's continued efforts to
reduce costs, reduced variable selling costs, principally royalties and
commissions, and lower legal expenses associated with certain cases that were
either settled or delayed due to the Company's financial difficulties. In the
three months ended September 28, 1996, selling, general and administrative
expenses decreased 31.1% to $12.0 million due to the factors noted above.
Measured as a percentage of net sales, these expenses decreased to 26.7% from
30.2%.

During the three and nine months ended September 28, 1996, the Company recorded
costs of $2.5 million to reflect the impact of reorganizing management to
strategically position itself for a definitive restructuring plan. These costs
consist primarily of severance pay, including that of the Company's former Chief
Executive Officer, who was relieved of his position in September 1996, and are
included in Unusual Charges in the Unaudited Consolidated Statements of
Operations. During the nine months ended September 30, 1995, the Company
recorded an unusual charge of $7.0 million due to the settlement of certain
environmental litigation.

Excluding the unusual charges, operating income for the nine months ended
September 28, 1996 was $4.0 million compared to $0.9 million in the comparable
prior year period. The 1996 operating income was primarily the result of
increased gross profit margins and lower selling, general and administrative
expenses discussed above. Including the unusual charges, the operating income
for the nine months ended September 28, 1996 was $1.5 million and the operating
loss for the nine months ended September 30, 1995 was $6.1 million.

As a result of the Company's Chapter 11 Cases, it incurred significant legal and
professional fees totaling $5.7 million and $8.5 million during the nine months
and $2.1 million and $3.2 million in the three months ended September 28, 1996
and September 30, 1995, respectively. These fees include the cost of the
Company's legal counsellors, financial advisors and consultants, as well as
those of certain of its creditors. These costs, which represent approximately
41.8% and 31.1% of the Company's loss from continuing operations for the nine
months ended September 28, 1996 and September 30, 1995, respectively, and 45.9%
and 41.7% for the three months then


                                       13
<PAGE>   16
                             SLM INTERNATIONAL, INC.
                             (DEBTOR-IN-POSSESSION)
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ended, are included as Debt Related Fees in the Unaudited Consolidated
Statements of Operations for the periods then ended. It is anticipated that
additional fees and costs will be incurred during the balance of 1996.

Interest expense approximated $9.4 million and $12.4 million for the nine months
ended September 28, 1996 and September 30, 1995, respectively. During the
reorganization proceedings the Company is generally not permitted to pay
interest. Therefore, the Company will record interest expense only to the extent
paid or earned during the proceedings and to the extent it is probable that the
Bankruptcy Court will allow interest on pre-Petition Date debt as a priority,
secured or unsecured claim. Interest expense in 1995 resulted from working
capital borrowings at higher short-term interest rates as well as default
interest rates being charged on the Company's bank debt and Senior Notes due to
defaults, offset in part by the allocation of interest expense to discontinued
operations.

The Company's loss from continuing operations for the nine months ended
September 28, 1996 was $13.7 million ($0.72 per share) compared to $27.4 million
($1.45 per share) in the comparable prior year period. The loss from continuing
operations for the three months ended September 28, 1996 was $4.5 million ($0.24
per share) compared to $7.8 million ($0.41 per share) in the comparable prior
year period.

LIQUIDITY AND CAPITAL RESOURCES

On October 24, 1995, SLM International, Inc. and six of its subsidiaries filed
for relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware. The Bankruptcy Court has
authorized the Company and these subsidiaries to operate their businesses in the
ordinary course while seeking to work out a plan of reorganization. The
Bankruptcy Court has also authorized the Company to use the cash generated by
its operations to continue to fund its business obligations, and to pay, among
other things, pre-Petition Date wages, salaries, sales commissions, employee
benefits and customs duties, honor manufacturer's warranties and pay certain
non-U.S. pre-Petition Date liabilities.

The Filing has enabled the Company to stabilize its liquidity position because
the cash requirements for the payment of accrued interest, accounts payable and
other liabilities, which arose prior to the Filing, are in most cases deferred
until the Reorganization Plan is approved by the Bankruptcy Court. Under the
Bankruptcy Code, the Company may elect to assume or reject leases, employment
contracts, service contracts and other executory pre-Petition Date contracts,
subject to Bankruptcy Court approval. The Company cannot presently determine or
reasonably estimate the ultimate liability which may result from the filing of
claims for any rejected contracts and no provisions have yet been made for these
items.

Prior to confirmation of a reorganization plan, management expects to finance
the Company's short-term working capital and capital expenditures requirements
through cash generated by its operations, as authorized by the Bankruptcy Court,
or through credit facilities as necessary. However, there can be no assurance
that the Company will be able to obtain such credit facilities or, if obtained,
that such facilities will be sufficient to enable the Company to meet its
liquidity requirements. Upon confirmation of a reorganization plan, the
Reorganized Company expects to meet its working capital and capital expenditures
requirements through a secured credit facility for which the Company has
received commitments from three prospective lenders. Such commitments are
contingent upon, among other things, confirmation of the Reorganization Plan.


During the nine months ended September 28, 1996, net cash used in operating
activities was $2.9 million compared to $18.4 million in the nine months ended
September 30, 1995. Cash used is net of $6.8 million and $5.0 million provided
from discontinued operations in 1996 and 1995, respectively.

Net cash flows used in investing activities during the nine months ended
September 28, 1996 and September 30, 1995 included purchases of fixed assets of
$1.8 million and $2.0 million, respectively. Net cash flows used in financing
activities during the period ended September 28, 1996 were approximately $5.3
million, resulting primarily from the use of cash from discontinued operations
for principal payments on the Company's secured debt as allowed by the
Bankruptcy Court. In the comparable 1995 period, net cash flows provided by
financing activities were approximately $13.4 million, resulting primarily from
the proceeds of short-term bank borrowings.

The Company follows the customary practice in the sporting goods industry of
offering extended payment terms to credit worthy customers on qualified orders.
The Company's working capital requirements generally peak in the third and
fourth quarters as it builds inventory and makes shipments under these extended
payment terms.


                                       14
<PAGE>   17
                             SLM INTERNATIONAL, INC.
                                     PART II
                                OTHER INFORMATION


 

ITEM 1.       LEGAL PROCEEDINGS

              Reference is made to Note 8 of Notes to Unaudited Consolidated
              Financial Statements included in Part I of this report.
 
ITEM 5.       OTHER INFORMATION

              On September 13, 1996, Howard J. Zunenshine was relieved of his
              position as the Company's Chief Executive Officer.

              On September 16, 1996, Gerald B. Wasserman was appointed President
              and Chief Executive Officer of the Company and its subsidiaries.
              Mr. Wasserman and the Company have agreed on an employment
              arrangement with a term of five years. Mr. Wasserman's base salary
              is $350,000 in the first year, with subsequent year salaries to be
              determined by the Board of Directors. In addition, Mr. Wasserman
              would receive stock options to acquire 10% of the Reorganized
              Company's Common Stock at exercise prices of $12.00 - 16.00 per
              share. In the event of termination of employment without cause,
              Mr. Wasserman would receive severance pay equal to three months of
              his current base salary for each year of service. The full terms
              of his employment arrangement will be set forth in a written
              employment agreement to be entered into between the Company and
              Mr. Wasserman.

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K.
              (a)   Exhibits:

                    27.1 Financial Data Schedule for the nine months ended
                    September 28, 1996.

              (b)   No reports were filed on Form 8-K during the quarter
                    ended September 28, 1996.


                                       15
<PAGE>   18
                             SLM INTERNATIONAL, INC.





                                   SIGNATURES

       Pursuant to 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.



                             SLM INTERNATIONAL, INC.
                                  (REGISTRANT)


                              By:    /s/ John A. Sarto
                                     -------------------------------------------
                                     Name:      John A. Sarto
                                     Title:     Vice President and
                                                Chief Financial Officer
                                                (Principal Financial Officer)






Date: November 26, 1996