UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

o		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

Commission file number: 333-123927

 

EASTON-BELL SPORTS, INC.

(Exact name of registrant as specified in its certificate of incorporation)

Delaware		20-1636283
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes þ No o

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 o No þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of voting and non-voting common equity held by non-affiliates of Easton-Bell Sports, Inc. is $0.

At February 28, 2011, 100 shares of Easton-Bell Sports, Inc. were outstanding.

 

 

PART I

Item 1.		Business

Easton-Bell Sports, Inc. was incorporated in Delaware in April 2003. Our executive offices are located at 7855 Haskell Avenue, Suite 200, Van Nuys, California 91406, and our telephone number is 818-902-5800. Easton-Bell Sports, Inc. is a wholly-owned subsidiary of RBG Holdings Corp., or RBG, which, in turn, is a wholly-owned subsidiary of EB Sports Corp., or EB Sports, of which 100% of the issued and outstanding voting common stock is owned by Easton-Bell Sports, LLC, the ultimate parent company, or our Parent. Unless otherwise indicated, all references in this Form 10-K to Easton-Bell, we, us, our, and the Company refer to Easton-Bell Sports, Inc. and its consolidated subsidiaries. References to Easton, Bell and Riddell refer to Easton Sports, Inc. and its consolidated subsidiaries, Bell Sports Corp. and its consolidated subsidiaries and Riddell Sports Group, Inc. and its consolidated subsidiaries, respectively.

Overview

We are a leading designer, developer and marketer of branded sports equipment, protective products and related accessories. We offer products that are used in baseball, softball, ice hockey, football and other team sports, and in various action sports, including cycling, snowsports, powersports and skateboarding. Sports enthusiasts at all levels, from recreational participants to professional athletes, choose our products for their innovative designs and advanced materials, which provide a performance or protective advantage. Throughout our history, our focus on research and development has enabled us to introduce attractive and innovative products, many of which have set new standards for performance in their respective sports. As a result, we are able to consistently enter new product categories and expand and improve our existing product lines.

We currently sell a broad range of products primarily under four well-known brands—Easton^® (baseball, softball and ice hockey equipment, apparel and cycling components), Bell^® (cycling and action sports helmets and accessories), Giro^® (cycling and snowsports helmets and accessories) and Riddell^® (football equipment and reconditioning services). Together, these brands represent the vast majority of our revenues. We believe that our brands are among the most recognized in the sporting goods industry as demonstrated by our leading market share in many of our core categories.

We sell our products through diverse channels of distribution including: (i) specialty retailers that cater to sports enthusiasts who typically seek premium products at the highest performance levels, (ii) national and regional full-line sporting goods retailers and distributors, (iii) institutional buyers such as educational institutions and athletic leagues and (iv) mass retailers that offer a focused selection of products at entry-level and mid-level price points. As a function of our flexible, low fixed-cost production model, we are able to leverage the expertise of our vendor partners in order to reduce the overhead and capital intensity generally associated with manufacturing.

Our Company follows a 52/53 week fiscal year, which ends on the Saturday closest to December 31. Fiscal year 2010 was comprised of 52 weeks and ended on January 1, 2011. Fiscal year 2009 was comprised of 52 weeks and ended on January 2, 2010. Fiscal year 2008 was comprised of 53 weeks and ended on January 3, 2009.

Industry Overview

Sporting Goods Industry

We compete in the sporting goods industry, which includes sports equipment, athletic footwear and apparel. According to NPD Group, a consumer research firm, the worldwide retail sporting goods market was estimated at $282.0 billion in 2009. According to the Sporting Goods Manufacturers Association, or SGMA, manufacturers’ sales of sporting goods in the United States, our largest market, has grown from $48.4 billion in 2000 to $64.8 billion in 2009. The SGMA also reported that sales of sporting goods in the United States fell by 4.3% in 2009 as consumers reduced spending in the wake of the recession. SGMA reported that sales of sporting equipment in the United States grew from $13.7 billion in 2000 to $20.2 billion in 2009, with 2009 realizing a decline in sales of approximately 2.5%. Although sales figures for 2010 are not yet available, we believe that sales in both sports equipment and the sporting goods market increased slightly in 2010 as the markets recovered from the 2008-2009 recessionary period. We believe that, in the long-term, avid participants will continue to be willing to pay premium prices for high performance and enhanced-protection equipment, which should contribute to future market growth.

The sporting goods equipment industry has undergone a period of consolidation. Certain equipment manufacturers have chosen to assemble a multitude of brands offering a wide range of commodity-like products often competing primarily on price. Others, including us, primarily focus on creating a portfolio of sporting goods products that are differentiated by high performance and compete on product quality, enhanced features, technology, styling, price and customer service.

Baseball and Softball

According to the SGMA, in 2009 in the United States baseball and softball (including both fast-pitch and slow-pitch) attracted approximately 13.8 million participants and 11.2 million participants, respectively. The SGMA reports that baseball participation has remained relatively stable in this decade, following declining participation in the 1990’s. After declining earlier this decade, participation rates for both fast-pitch and slow-pitch softball have been relatively stable over the past few years. Wholesale shipments of baseball and softball equipment were approximately $487.0 million in 2009, as compared to $510.0 million in 2008, representing a decline of approximately 4.5%. The SGMA estimates that greater than 40% of the expenditures in baseball and softball are related to the purchase of bats. We believe the enthusiast base in these sports will experience continued growth, driven by increasing popularity of travel ball, club baseball and softball and more frequent play.

Ice Hockey

According to the SGMA, ice hockey attracted 2.1 million participants in the United States in 2009 and United States wholesale shipments of ice hockey equipment was approximately $223.0 million in 2009, representing a 2.3% increase compared to the $218.0 million of ice hockey equipment sold in 2008. We estimate that the Canadian ice hockey market is at least as large as the United States market in terms of participants and dollars spent. The SGMA reports that United States participation in ice hockey in 2009 has almost doubled at the high school level since 1990, including an increase in female participation.

Football Helmets

According to the SGMA, tackle football attracted approximately 6.8 million United States participants and total United States manufacturers’ sales of football equipment were estimated at $497.0 million in 2009. As the largest and most popular sport for high school and college males, the football market is expected to continue to grow. Competitive tackle football leagues, such as the NCAA, high school leagues and Pop Warner, have increasingly emphasized the safety of participants by enforcing exacting equipment standards with an increased focus on the protective characteristics of helmets. As a result, football helmets have typically commanded higher price points, as well as faster equipment replacement and reconditioning rates. Due to the prevalence of dedicated organizations and players that demand a high level of safety without sacrificing performance, we believe that growth in sales of high performance, technologically advanced football equipment, including helmets and shoulder pads, as well as reconditioning services resulting from this trend will continue to provide a growth opportunity.

Cycling Helmets and Related Accessories

According to the SGMA, cycling (including bicycle motocross, or BMX, road and mountain biking) attracted approximately 49.1 million participants in 2009, as compared to approximately 47.6 million in 2008. Cycling has become one of the most popular physical activities in the United States and many states have laws mandating the use of helmets while riding a bicycle for those under the age of 18. Cycling continues to be influenced by increased television coverage of major events such as the Tour de France. In addition, many observers believe that cycling sales and participation rates have increased as a result of higher costs of gasoline in recent years and an increasing presence of the green movement.

The accessory segment of the United States bicycle industry is larger than the helmet segment and is driven by highly technical products that command premium prices. As the mix of riders has shifted towards high-end road cyclists, the demand for such accessories has increased significantly.

Helmets for Action Sports, including Snowsports and Powersports

Participation in action sports, such as snowboarding has grown recently. The SGMA estimates that United States manufacturers’ sales of snowboarding equipment in 2009 were $172.0 million. Events such as the ESPN X Games, the inclusion of snowboarding as a medal event in the Winter Olympics and the national recognition of leading board sport athletes have broadened general awareness of the action sports lifestyle. In addition, we believe that use of motor and other electric scooters is increasing. Growth in these sports should drive overall helmet sales as participants become more aware of the risk of head injuries.

Sports Apparel

According to the SGMA, wholesale spending for consumer sports apparel in the United States declined 5.0% in 2009, to approximately $28.2 billion in annual sales. The sports apparel segment is benefiting from consumers’ preference toward casual, comfortable clothing. The NPD Group has found that only about 30% of sports apparel spending goes toward clothes that consumers intend to use for sports or fitness activities. Recent performance driven innovations, such as advanced features and highly technical fabrics, have fueled demand and increased price points for performance athletic apparel in recent years.

Our Brands

We currently sell a broad range of products, primarily under four well-known brands—Easton, Bell, Giro and Riddell—which represent the vast majority of our sales. We believe that our brands are among the most recognized and respected in the sporting goods industry, as demonstrated by our leading market share in many of our core categories. As a result of the high-performance nature of our products, we have been able to build and maintain relationships with professional and college sports teams, leagues and organizations and high-profile athletes. The visibility provided by these relationships reinforces the authenticity of our brands and drives demand for our products among retailers and consumers.

Our four primary brands include:

Easton. Under the Easton brand, founded in 1922, we offer baseball, softball, ice hockey equipment and cycling components. We believe Easton is recognized as one of the most innovative brands in the baseball, softball and ice hockey equipment industry. In Major League Baseball, or MLB, All-Star players Jason Bay, Andre Ethier and David Ortiz wear and use the Easton brand. We believe our hockey sticks are used by more National Hockey League, or NHL, players than any other brand and that consumers choose Easton branded products due to their combination of performance, quality and value. As a result, we have been able to build and maintain relationships with some of the most visible professional athletes in the NHL, which includes All-Star players Zdeno Chara, Ryan Getzlaf, Dany Heatley and Jarome Ignila who wear and use Easton hockey equipment.

Bell. Under the Bell brand, founded in 1954, we offer helmets for cycling, motorcycles (street and motorcross), auto racing, skateboarding and other action sports, as well as various cycling and fitness accessories. We believe Bell is the number one brand in the United States by sales in cycling helmets and accessories. Bell branded products are used by cycling enthusiasts ranging from competitive athletes to recreational users. Consumers choose Bell branded cycling helmets due to design, fit, quality, durability and value. The Bell brand image of toughness, dependability and performance is supported through the use of Bell products by, and sponsorship of, such high-profile athletes and professional cycling teams as U.S. National Road Champion George Hincapie, Road World Champion Cadel Evans, U.S. National Time Trial Champion Taylor Phinney and motocross champion James Stewart.

Giro. Under the Giro brand, founded in 1986, we offer premium helmets for cycling and various snowsports (including skiing and snowboarding), as well as various accessories, including snow goggles and cycling gloves. We believe the Giro brand is the number two brand in the United States by sales in cycling helmets (second only to Bell) and the number one brand in the United States by sales in ski and snowboard helmets. We believe that consumers are willing to pay premium prices for our Giro helmets due to Giro’s reputation for innovation as well as sleek, stylish and speed-oriented designs. The Giro brand image is reinforced through the use of Giro products by, and sponsorship of, leading professional athletes, including Tour de France winners Lance Armstrong and Alberto Contador and Winter X Games gold medal winners Gretchen Bleiler and Simon Dumont.

Riddell. The Riddell brand, founded in 1929, is one of the most recognized brands in football. The Riddell branded helmet is used by numerous Division I NCAA football teams and has been the Official Helmet of the National Football League, or NFL, since 1989, resulting in significant awareness of the Riddell brand with the general public, as well as with youth leagues and high schools. Under the Riddell brand, we sell football helmets, shoulder pads and related equipment, uniforms and reconditioning services for our football and other team sports products. We also sell branded collectible products, such as replica football helmets which reflect NFL and popular collegiate team logos.

In addition to the above products, we also sell a variety of accessories, including (i) bicycle pumps, headlights, safety lights and reflectors under the Blackburn^® brand, (ii) bicycle trailers and child carrier seats under the CoPilot^® brand (founded in 2000), and (iii) a full line of mats, resistance bands, kits and other fitness accessories designed primarily for strength training, yoga and pilates under the Bell and Savasa^® (launched in 2004) brands. Additionally, we own the rights to use the widely recognized MacGregor^® brand (exclusive of golf products), which we license to select third parties to manufacture and market footwear and other sports equipment.

Products and Services

For the period ended January 1, 2011, we had two reportable segments: Team Sports and Action Sports. Our Team Sports segment primarily consists of football, baseball, softball, ice hockey and other team sports products and reconditioning services related to certain subcategories of these products. Our Action Sports segment primarily consists of helmets, equipment, components and accessories for cycling, snowsports and powersports and fitness related products. For financial information on each segment, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Note 6 to our Consolidated Financial Statements contained herein.

Team Sports

Our Team Sports segment produces technologically advanced equipment and apparel for baseball, softball, ice hockey and football and also provides reconditioning services for various sporting goods.

Baseball and Softball

We offer a broad line of baseball and softball (both slow-pitch and fast pitch) equipment and accessories (bats, gloves, protective equipment and apparel) for athletes and enthusiasts at all levels of competition. Substantially all of our baseball and softball products are currently sold under the Easton brand name. Since our first aluminum bat produced in 1969, our bats have featured advanced designs and materials to optimize hitting performance, feel and durability. Baseball and softball products accounted for approximately 19.6%, 19.2% and 20.3% of our net sales in 2010, 2009 and 2008, respectively.

Ice Hockey

We offer a broad line of ice hockey equipment and accessories (sticks, blades, skates, protective equipment and apparel) for athletes and enthusiasts at all levels of competition. All of our ice hockey products are sold under the Easton brand name. We believe our sticks are used by more NHL players than any other brand. Ice hockey products accounted for approximately 14.4%, 15.0% and 15.1% of our net sales in 2010, 2009 and 2008, respectively.

Football

Football Helmets — Substantially all of our football products and services are currently sold under the Riddell brand name. We believe we are the world’s leading designer, developer and marketer of football helmets. Our football helmets are designed to provide excellent on-field performance while meeting or exceeding all relevant safety standards.

Reconditioning Services — We believe we are the leading reconditioner of football equipment in the United States. We recondition football helmets and shoulder pads, baseball and lacrosse helmets, catcher’s equipment, baseball gloves and hockey helmets and shoulder pads. Most of our reconditioning volume is comprised of football helmets and shoulder pads as reconditioning typically includes the cleaning, sanitizing, buffing and/or painting of helmets. Face guards, interior pads, chin straps and other helmet components are inspected and replaced as necessary. Helmets are recertified to conform to the standards set by the National Operating Committee on Standards for Athletic Equipment, or NOCSAE, which is the leading standard-setting organization for athletic equipment.

Football equipment and reconditioning services accounted for approximately 12.7%, 11.4% and 10.7% of our net sales in 2010, 2009 and 2008, respectively.

Other Products and Licensing

We sell collectible football helmets that primarily reflect licensed NFL and major collegiate trademarks. Our collectible helmets are available in a variety of sizes and forms, including authentic helmets that are identical to competitive helmets used on-field by professional players, replica helmets that have a similar appearance to the authentic helmet but are constructed with less advanced materials, mini helmets that are half-scale versions of full-size helmets and pocket size helmets that appeal to both collectors and the mass market.

In addition to the team sports products described above, we offer a range of practice wear, apparel, footwear and game uniforms under the Riddell and Easton brand names that are used on and off the field by football, baseball, softball and ice hockey athletes. These functional products incorporate advanced technical materials and innovative designs, such as our Full Range Motion technology or FRM, which enables the athlete to have full range of motion without affecting the garment body.

We also have entered into selective licensing agreements that allow third parties to manufacture and market products under the Riddell, Easton and MacGregor brand names. Products currently licensed include Riddell footwear, Easton footwear, Easton table and outdoor games and MacGregor footwear and team sports equipment. We receive royalty income from sales of these products.

Other team sports products and licensing accounted for approximately 8.6%, 8.5% and 9.9% of our net sales in 2010, 2009 and 2008, respectively.

Action Sports

Our Action Sports segment encompasses a number of individual sports, such as cycling, extreme sports, snowsports, powersports and fitness activities. Within many of these sports, we are primarily focused on the helmet market. Within cycling, we are also focused on the accessories and premium components markets.

Cycling and Extreme Sports

Substantially all of our recreational cycling and extreme sports helmets are sold under the Bell brand name and our premium cycling helmets are sold under the Bell and Giro brand names. We sell premium cycling components under the Easton brand name and high-performance accessories under the Blackburn brand name. We also sell other accessories under the Bell and CoPilot brand names and certain recreational youth cycling helmets and accessories under various licensed brands, including Barbie, Hot Wheels, Sesame Street and X Games.

Helmets — We offer helmets designed for cycling and action sports, including skateboarding and BMX biking. These helmets incorporate many proprietary technologies and feature styling designed to appeal to sports enthusiasts. Cycling and action sports helmets accounted for approximately 17.3%, 19.2% and 19.3% of our net sales in 2010, 2009 and 2008, respectively.

Premium Cycling Components and Accessories — We offer premium cycling components, including handlebars, tubing and wheels that are sold through specialty retailers and directly to original equipment manufacturers. Our cycling components incorporate advanced designs and materials for optimal weight, strength and shock-absorbing characteristics and are frequently used by professional racing teams. Under the Blackburn brand name, we offer a broad range of high-performance accessories, including air pumps and CO₂ inflators, aluminum racks, lights, cyclometers and tools. Premium cycling components and accessories accounted for approximately 6.1%, 5.6% and 6.5% of our net sales in 2010, 2009 and 2008, respectively.

Cycling Accessories — We offer a wide selection of cycling accessories, including lights, mirrors, reflectors, locks, pumps, pedals, tires, protective pads, gloves and bags under our Bell and CoPilot brands that are sold primarily through mass retailers. Cycling accessories accounted for approximately 11.0%, 11.2% and 9.4% of our net sales in 2010, 2009 and 2008, respectively.

Snowsports

We offer helmets for various snowsports, including snowboarding and skiing, as well as various snowsports accessories. Our snowsports helmets and accessories are sold under the Giro brand name. We have consistently been a leader in comfort and fit, as well as performance, from our first snow helmet with adjustable vents to wireless audio helmets, which feature specially designed headphones that are built seamlessly into the helmet ear pads and can be used with MP3 players or other portable audio devices. Snowsports helmets accounted for approximately 6.7%, 6.1% and 4.7% of our net sales in 2010, 2009 and 2008, respectively.

Powersports

We offer helmets for various powersports, including motocross and auto racing, as well as various powersports accessories under the Bell brand name. Our powersports helmets are designed for motorcycles, both street and motocross, snowmobiles and auto racing. Powersports helmets and accessories accounted for approximately 1.2%, 1.3% and 1.8% of our net sales in 2010, 2009 and 2008, respectively.

Fitness Accessories

We offer a broad line of fitness accessories, including mats, resistance bands, weights and other fitness products designed primarily for strength training, yoga and pilates. All of our fitness accessories are sold under the Bell and Savasa brands. Fitness accessories accounted for approximately 2.4%, 2.5% and 2.3% of our net sales in 2010, 2009 and 2008, respectively.

Competition

Although we have no competitors which challenge us across all of our product lines, the markets for our products are highly competitive and we face competition from a number of sources in many of our product lines.

Team Sports

In baseball and softball, we compete with numerous national and international competitors including Rawlings Sporting Goods, Worth Sports, Wilson Sporting Goods, Hillerich & Bradsby and Mizuno Corp. In ice hockey, we primarily compete with Bauer Hockey and Reebok-CCM Hockey. In football, we compete with several companies, such as Adams USA, Schutt Sports, Douglas Protective Equipment and Rawlings Sporting Goods and our reconditioning business competes with many regional companies. Our uniform and practice wear business also competes with national businesses such as Adidas, Nike, Russell Athletic and Under Armour. We believe that we compete in each of these team sports markets on the basis of brand name recognition, product features, quality and customer service.

Action Sports

In cycling helmets and components, we compete with several national and regional competitors. Within the mass retail channel, our main competitor is Dorel Industries, Inc., or DI, which markets its products under such well-known brand names as Schwinn, Mongoose and GT. DI competes with us primarily on brand name recognition and price. In the specialty retail channel, our primary competitors are Trek Bicycle Corporation and Specialized Bicycle Components, both of whom compete with us mostly on a combination of performance, price, style, quality, design and focus on cycling enthusiasts.

We primarily compete in the snowsports and powersports markets with a number of smaller companies and a few multinationals, which compete mostly on a combination of performance, price and design. In the snowsports helmet market, we compete with several domestic and international brands, including Boeri, Carrera, Leedom, Marker, Pro-Tec, R.E.D., which is owned by The Burton Corporation, Salomon, which is owned by Amer Sports and Smith. In the powersports helmet market, we compete against such well-known brands as Arai, Shoei, HJC and KBC.

Sales

We utilize separate sales forces and a variety of distribution channels for the various products in our segments, enabling us to design specific marketing strategies for each brand and product.

Sales of Team Sports Products

Retail Sales

We sell a broad selection of our team sports products, including our baseball, softball and ice hockey products, to both national and regional full-line sporting goods retailers in North America. We believe that our leading brands and the breadth and depth of our product portfolio match well with sporting goods chains’ marketing strategies, product selections and service capabilities, which generally fall between those of mass merchants and specialty retail accounts. Our extensive product selection allows sporting goods retailers to tailor their mix of our products to their individual selling strategies. In addition, we believe that sporting goods retailers benefit from consumer recognition and demand for our brands through increased foot traffic in their stores. We also sell team sports products to approximately 2,800 independent specialty retail accounts in North America. These retailers cater their marketing and product selections to sports enthusiasts who often seek premium products having the highest level of performance. We work with specialty customers to improve sales and profits by providing highly visible product displays and point-of-purchase signage.

Our team sports products that are sold to retail customers are sold through our network of approximately 50 in-house and independent sales representatives in the United States and Canada and through various third party distributors in other regions of the world. Our in-house sales team provides sales and support services to key retail accounts. Sales efforts to these customers are led by a national account manager, supported by other members of the sales team. These sales teams visit frequently with our larger customers to assist them with in-store merchandising, signage and market guidance, as well as to receive feedback and to anticipate future needs.

Institutional Sales

We primarily sell football helmets, shoulder pads, certain other team sports equipment, uniforms, accessories and reconditioning services to educational institutions and athletic leagues. We have a direct sales force and marketing team of approximately 250 individuals, which focus on sales to the NFL and approximately 17,000 high schools, 1,100 colleges and numerous youth leagues across the United States. We believe our institutional sales force, made up primarily of former players, former coaches and experienced industry sales professionals, is the largest national direct sales force for football products and services in the institutional sporting goods industry and provides us with a significant competitive advantage. Their experience helps us understand the needs, budgetary and timing constraints and other concerns of our customers and also facilitates education on new product offerings. Additionally, this approach allows us to sell equipment and reconditioning services directly to our customers, which enables us to more readily explore add-on sales opportunities. Our ability to actively manage the requirements of thousands of schools, leagues and professional teams with timely and expert service has aided us in establishing a reputation as a leader in customer service with a loyal customer base.

Sales of Action Sports Products

We primarily sell our broad selection of action sports products, including cycling, snowsports, powersports and skateboarding helmets and accessories through independent specialty retail accounts, sporting goods stores and mass retailers. We also sell premium aftermarket cycling components and accessories to distributors who supply the specialty retail channel and directly to bicycle manufacturers.

We utilize approximately 100 in-house and independent sales professionals across North America and a network of approximately 90 third-party distributors in other regions of the world to distribute our action sports products. Similar to our in-house sales team for team sports products, our in-house sales team for action sports products provides sales and support services to key retail accounts, including category management services for certain of our mass retail customers. These efforts are led by a national account manager, who is supported by other members of the sales team. These sales teams work with large sporting goods and mass retail customers to assist them with in-store merchandising, signage and market guidance, as well as to receive feedback and to anticipate future needs.

Marketing

Relationships with Athletes, Teams and Organizations

Our Easton, Bell, Giro and Riddell brands have enjoyed high visibility around the world due to use of our products by leading athletes. Many high-profile athletes choose to use our products even though they are not sponsored by us, which gives our products increased exposure to consumer audiences, strengthens the perceived authenticity of our brands and drives demand for our products among retailers and consumers. Our brands have a strong presence in professional (MLB, the NHL and the NFL), collegiate and youth leagues, the Summer and Winter Olympics, the Tour de France, X Games and NASCAR.

We sponsor several hundred individuals, including teams across baseball, softball, ice hockey, cycling, snowboarding, skiing, motocross, auto racing and other sports around the world. In addition, we have an exclusive contract with the NFL under which our football helmets are designated the Official Helmet of the NFL. Our agreement with the NFL permits our Riddell brand mark to appear on the front and on the chin strap of each Riddell helmet used during NFL play and provides that there be no indicia of any other brand on any other helmet worn during a game. We believe that Riddell helmets are used by approximately 76% of the players in the NFL. At the youth level, Riddell is the Official Football Helmet & Protective Equipment Partner of USA Football and the Official Hardgoods Supplier of American Youth Football, which are associated with a combined 3.5 million youth football players. Within hockey, we believe that approximately 42% of NHL players use Easton hockey sticks and in baseball, Easton is the official equipment supplier of the Little League World Series.

Advertising and Promotional Events

As a result of the foregoing relationships, we receive a significant amount of media exposure. We augment this exposure with advertisements highlighting the distinctive design, quality and features of our products in various media outlets, including industry periodicals, magazines, newspapers and television media. To further reinforce and build our brand recognition, we conduct a variety of marketing and promotional events in support of our products. For example, we participate in coaches clinics and equipment shows throughout the year where our product lines are displayed and promoted along with our reconditioning services. In addition, we dedicate resources to educate customers on the importance of helmet safety and proper fit and invest in initiatives designed to increase awareness of the importance of head protection in preventing brain injury.

Design and Product Development

Investment in research and development has been and continues to be a critical component of our business strategy. We are committed to the design and development of new products utilizing new technologies that provide athletes and other sports enthusiasts with performance or protective advantage over existing products. We believe that innovation drives consumer demand and often leads to higher selling prices. We have a track record for innovation in each of the markets in which we compete.

We also actively work with several organizations that set safety or performance standards for the sporting goods we sell. Our products meet or exceed the standards established by the most important regulatory and testing bodies, including the Department of Transportation, the Consumer Product Safety Commission, or CPSC, the Hockey Equipment Certification Council, or HECC, and Canadian Standards Association, or CSA, and various private organizations, including NOCSAE, which is the leading standard-setting organization for athletic equipment (including football, baseball and softball helmets, as well as other equipment) and the Snell Memorial Foundation, which is a leading organization that tests and certifies helmets for cycling, snowsports, powersports and other action sports. We also work with various athletic leagues, including the NFL, the NHL, MLB, the NCAA and Little League Baseball and Softball, that set standards for equipment used in competition and various conferences within these athletic organizations that have their own standards. We believe that we have regularly been among the first to adopt new safety or performance standards.

We invest in engineering and applied research to improve both the quality and performance of our current products and to develop new products. Our in-house product design, engineering, research and development and testing group includes approximately 177 employees. Our product development personnel work with top athletes to understand the latest industry trends and to develop new products or features that respond to their needs as well as set new industry standards. This team is augmented by additional product development, engineering and quality control personnel in the United States and Hong Kong who assist with the engineering and design of our products. We regularly test products throughout the development and manufacturing processes and all of our products are subjected throughout the manufacturing process to various quality control procedures that often exceed those mandated by law.

Production, Sourcing and Distribution

We currently maintain manufacturing, assembly and distribution facilities in the United States, Canada, Mexico, China and Taiwan. We also generally employ a dual strategy for sourcing goods from third parties. For certain of our products that involve our proprietary design and materials technologies, we negotiate exclusive agreements with a limited number of manufacturing partners. For our products that are less complex to produce, we maintain relationships with a broader base of suppliers to purchase goods as needed without contractual obligation.

Our aluminum and composite baseball and softball bats are manufactured in Asia. We manufacture a portion of our composite ice hockey sticks and blades and certain cycling components at our facility in Tijuana, Mexico and the balance of these products are sourced from various domestic and international suppliers. Custom ice hockey pants, gloves and skates are manufactured at our facility in Quebec, Canada. We assemble and package a portion of our cycling, football, snowsports, powersports and other helmets at our Elyria, Ohio and Rantoul, Illinois facilities, while the balance of our helmets are sourced from outside of the United States. Reconditioning services are performed at facilities strategically located throughout the United States, Canada and Mexico. In addition, we maintain a silk screening operation at our Elk Grove Village, Illinois facility to customize our football practice wear and uniform products with almost any logo, team name or other design that our customer requests.

We complement our manufacturing infrastructure with overseas sourcing and leverage our purchasing volumes to receive lower prices. We have exclusive agreements with various third-party vendors in Asia to produce a portion of our aluminum and composite products. These agreements provide us with additional flexibility and manufacturing capacity. To protect the integrity of our brands, we actively inspect products purchased from third-party vendors to confirm that they meet our high-quality standards. We have a product development team in Hong Kong that supports our Asian sourcing efforts. In addition to handling product design, this team visits and works with many of our suppliers to verify product specifications, logistics and quality control. We require our suppliers to perform factory tests periodically to confirm the material and functional integrity of our products.

We operate distribution facilities in Illinois, Pennsylvania, Utah, Canada and Taiwan, which allow us to maintain high service levels for our customers across all distribution channels. We also use a third party distributor in Tennessee to provide distribution services for apparel.

Seasonality

Our business is subject to seasonal fluctuation. Sales of cycling products and accessories occur primarily during the warm weather months. Sales of baseball and softball products occur primarily in the late winter and early spring months in preparation for the spring baseball season. Sales of football helmets, shoulder pads and reconditioning services are driven primarily by football buying patterns, where orders begin at the end of the school football season (December) and run through to the start of the next season (August). Shipments of football products and performance of reconditioning services reach a low point during the football season. Sales of ice hockey equipment are driven by ice hockey buying patterns with orders shipping in late spring for fall play. Seasonal impacts are increasingly mitigated by the rise in snowsports sales which, to a certain extent, counter the cycling, baseball, softball and football seasons.

Intellectual Property

We have a portfolio of approximately 182 patents along with approximately 79 pending patent applications. While we believe certain of these patents are material to the success of our products based on currently competing technology, we also believe that experience, reputation, brand recognition and our distribution network provide significant benefits to our business.

We believe our well-known brands—Easton, Bell, Giro and Riddell—are a core asset of our business and are of great value to us. We maintain a portfolio of active registered trademarks in support of our brands, including registration of certain trademarks in the United States and in certain other countries. We have also obtained licenses to use certain popular brands on select youth cycling helmets and accessories from several companies including Mattel Inc., to use the Barbie and Hot Wheels brands, ESPN, Inc., to use the X Games brand and the Sesame Workshop, to use the Sesame Street brand.

In connection with our purchase of Easton Sports, Inc., or Easton, in March 2006, we licensed the Easton trademark to certain affiliates of James L. Easton solely in connection with specific products or services, none of which currently compete with us. For a discussion of this license and other related technology licenses to such James L. Easton affiliates, see “Item 13 — Certain Relationships and Related Transactions, and Director Independence.” We also license the Easton trademark to third parties with respect to the production and marketing of footwear and certain recreational games, the Riddell trademark for footwear and the MacGregor trademark primarily for athletic footwear and sports equipment. In addition, the Bell trademark is currently licensed to a third party for the production of motorcycle helmets and accessories sold outside of the United States, Canada and Mexico.

Employees

We believe that our relationships with our employees are good. As of January 1, 2011 we had 2,710 employees, including 177 in product design, engineering, research and development and testing, 1,840 in operations, including manufacturing and distribution, 341 in sales and marketing and 352 in administration. Approximately 50 of our employees are represented by unions. Our collective bargaining agreement with a union in York, Pennsylvania, expires in December 2012, and an agreement with a union in Mount Vernon, New York, expires in January 2012.

Insurance and Risk Management

Our business exposes us to claims for product liability and warranty claims in the event our products actually or allegedly fail to perform as expected, or the use of our products results, or is alleged to result, in personal injury or death. We have various pending product liability cases against us. We vigorously defend product liability cases brought against us and actively manage our product liability exposure through research and testing, active case management and insurance. We maintain levels of insurance which we believe to be adequate. Our primary product liability insurance policy expires in July 2011.

Governmental Regulation

Our products and accessories are subject to the Federal Consumer Product Safety Act, which authorizes the CPSC to protect consumers from hazardous sporting goods and other products. The CPSC has the authority to exclude from the market certain articles which are found to be hazardous and can require a manufacturer to repurchase such goods. We maintain a quality control program for our protective equipment operations and retail products that is designed to comply with applicable laws. To date, none of our products have been deemed to be hazardous by any governmental agency. Operations at all of our facilities are subject to regulation by the Occupational Safety and Health Administration, and various other regulatory agencies. Our operations are also subject to environmental regulations and controls. While some of the raw materials used in our operations may be potentially hazardous, we have not received any material environmental citations or violations and we have not been required to spend significant amounts to comply with applicable law or to remediate conditions created by releases or disposal of hazardous materials.

Financial Information on Geographical Areas

For financial information on geographic areas, see Note 6 to our Consolidated Financial Statements contained herein.

Item 1A.		Risk Factors

Economic conditions could adversely affect the profitability of some or all of our businesses.

Recent turmoil in the financial markets has adversely affected economic activity in the United States and other regions of the world in which we do business. Our operations and performance depend significantly on worldwide economic conditions. Many of our products are discretionary items and the purchase of these items may be easily deferrable by consumers should the financial wherewithal of consumers not justify such purchases. Uncertainty about current global economic conditions could pose a risk as some consumers and businesses could postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for our products and services. A decrease in the budgets of our institutional customers, such as schools could also lead to decreased spending by such customers on our products which could have a material negative impact on our operations. In the current fiscal year, we have experienced the effect of consumers trading down price points and delaying certain discretionary purchases, which has resulted in retailers reluctance to place orders for inventory in advance of selling seasons. Further, institutional customers have reduced or deferred purchases due to budget constraints. These trends have had and may continue to have a negative impact on our businesses.

Collectability of receivables from our customers may also be adversely affected, causing an increase in aged receivables and/or a reduced collection rate. If we are forced to write off uncollectible accounts as a result, our profitability would be adversely affected. These conditions could also impair the ability of those with whom we do business to satisfy their obligations to us. A sustained decline in economic conditions could further reduce demand for our products, driving down their prices. In addition, the economic downturn could adversely affect the fiscal health of key customers or impair their ability to continue to operate during a recessionary period, which would decrease our revenues unless we are able to replace any lost business. Other factors that could influence demand include increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors affecting consumer spending behavior.

The uncertain worldwide economic environment could cause the reported financial information not to be necessarily indicative of future operating results or of future financial condition. The current economic environment continues to affect our business in a number of direct and indirect ways including: tighter inventory management by retailers; the potential for reduced profit margins due to pricing pressures and an unfavorable sales mix due to a higher concentration of sales of mid to lower price point products; changes in currency exchange rates; tightening of credit markets; and business disruptions due to difficulties experienced by suppliers and customers. In addition, slowing consumer demand for our products has caused lower net sales in the past, and this could potentially recur in the future.

Our products face intense competition, and if we cannot compete successfully in our industry, we could lose market share and our business could be adversely affected.

Although we believe that we have no competitors that challenge us across all of our product lines, the markets for our products are highly competitive and we face competition from a number of sources in many of our product lines. Competition is primarily based on brand name recognition, product features, style, quality, price and customer service. Our baseball and softball equipment business has numerous national and international competitors, including Rawlings Sporting Goods, Worth Sports, Wilson Sporting Goods, Hillerich & Bradsby and Mizuno Corp. Our ice hockey equipment business principally competes with Bauer Hockey and Reebok-CCM Hockey. Our football equipment business competes with several companies, including Adams USA, Schutt Sports, Douglas Protective Equipment and Rawlings Sporting Goods and our reconditioning business competes with many regional companies. Our uniform and practice wear business also competes with national businesses such as Adidas, Nike, Russell Athletic and Under Armour. Our cycling helmet, accessories and component business competes with several national and regional competitors, including Dorel Industries, Trek Bicycle Corporation and Specialized Bicycle Components, as well as with several other international companies. In the snowsports helmet market, we compete with several domestic and international brands, including, Boeri, Carrera, Leedom, Marker, Pro-Tec, R.E.D., which is owned by The Burton Corporation, Salomon, which is owned by Amer Sports and Smith. In the powersports helmet market, we compete against such well-known brands as Arai, Shoei, HJC and KBC. Many of these competitors are significantly larger and have greater financial resources than we do.

In order to compete effectively, we must (1) maintain the image of our brands and our reputation for quality and performance in our core markets; (2) be flexible and innovative in responding to changing market demands on the basis of brand image, style, performance and quality; (3) keep pace with rapid changes in marketing strategies; and (4) offer consumers a wide variety of high quality products at competitive prices. The purchasing decisions of consumers are highly subjective and can be influenced by many factors, such as brand image, marketing programs and product design. Several of our competitors enjoy substantial competitive advantages, including greater financial resources for competitive activities, such as sales and marketing and strategic acquisitions. The number of our direct competitors and the intensity of competition may increase as we expand into other product lines or as other companies expand into our product lines. Our ability to expand into other product lines may be inhibited by the risk of infringing intellectual property held by our competitors and, if we hold intellectual property rights in an area that competitors are expanding into, we cannot assure that we will successfully challenge such expansion. Furthermore, our inability to maintain or expand our intellectual property assets may inhibit our ability to comply with license terms concerning intellectual property assets. Our competitors may enter into business combinations or alliances that strengthen their competitive positions or prevent us from taking advantage of such combinations or alliances. Our competitors also may be able to respond more quickly and effectively than we can to new or changing opportunities, standards or consumer preferences. Our results of operations and market position may be adversely impacted by our competitors and the competitive pressures in the apparel, sporting goods and footwear industries.

Increased competition in the markets for our products may cause us to reduce our prices to retailers and customers, which would cause our gross margin to decline if we are unable to offset price reductions with comparable reductions in our product costs. If our gross margin declines, our profitability could decline and we could incur operating losses that we may be unable to fund or sustain for extended periods of time, if at all. We cannot assure you that additional competitors will not enter our existing markets or that we will be able to compete successfully against existing or new competition.

Sales of our products may be adversely affected if we cannot effectively introduce new and innovative products.

The sporting goods industry is subject to constantly and rapidly changing consumer demands based on performance features. Our success depends, in part, on our ability to anticipate, gauge and respond to these changing consumer preferences in a timely manner while preserving the authenticity and quality of our brands. We believe the historical success of our business has been attributable, in part, to the introduction of products, which represent an improvement in performance over products then available in the market. Our future success will depend, in part, upon our continued ability to adapt to new materials, and to develop and introduce innovative products in the sports equipment and accessories markets in which we compete. Our success is also dependent on our ability to prevent competitors from copying our innovative products. We may not be able to obtain intellectual property protection for an innovative product and, even if we do, we cannot assure that we would be successful in challenging a competitor’s attempt to copy that product. Furthermore, successful product designs can be displaced by other product designs introduced by competitors which shift market preferences in their favor. Our competitors may obtain intellectual property protection for superior products that would preclude us from offering the same or similar features. Our competitive position could be particularly harmed if a competitor’s proprietary product feature became the industry standard. If we do not introduce successful new products or our competitors introduce products that are superior to ours, our customers may purchase products from our competitors, which will result in a decrease in our net sales and excess inventory levels, and will adversely affect our business.

As is typical with new products, market acceptance of new designs and products we may introduce is subject to uncertainty. In addition, we generally make decisions regarding product designs significantly in advance of the time when consumer acceptance can be measured. If trends shift away from our products, or if we misjudge the market for our product lines, we may be faced with significant amounts of unsold finished goods inventory or other conditions which could have a material adverse effect on our results of operations.

The failure of new product designs or new product lines to gain market acceptance could also adversely affect our business and the image of our brands. Achieving market acceptance for new products may also require substantial marketing efforts and expenditures to expand consumer demand. These requirements could strain our management, financial and operational resources. If we do not continue to develop innovative products that provide better design and performance attributes than the products of our competitors and that are accepted by consumers, or if our future product lines misjudge consumer demands, we may lose consumer loyalty, which could result in a decline in our revenues and market share.

The success of our business is dependent on our affiliation with athletes, athletic associations and leagues.

We sponsor numerous professional athletes in baseball, cycling, ice hockey, action sports, snowsports and powersports who endorse and use our products, including our Easton branded baseball equipment and ice hockey sticks and our Bell and Giro branded helmets. We believe these sponsorships contribute to the authenticity and image of our brands. In addition, under our agreement with the NFL, the Riddell name may appear on the front of and on the chin strap of all of our football helmets used in NFL play, and no other brand name may appear on a football helmet, face mask or chin strap used in NFL play. Also, our equipment is used by numerous Division I NCAA sports teams. We believe that these relationships increase sales of our products by enhancing the visibility of our brands and related trademarks and exposure of our branded products to other customers and, in certain instances, provide us with a significant competitive advantage. If we were to lose the benefits of these relationships, or if they were to deteriorate in a material way, our business and results of operations, financial condition and cash flow could be adversely affected.

We cannot assure you that we will be able to maintain our existing relationships with these professional athletes or leagues in the future or that we will be able to attract new athletes or leagues to endorse our products. Larger companies with greater access to capital for athlete or league sponsorship may in the future increase the cost of sponsorship to levels we may choose not to match. If this were to occur, our sponsored athletes or leagues may terminate their relationships with us and endorse the products of our competitors and we may be unable to obtain endorsements from other, comparable athletes or leagues.

Sales of our products will be adversely affected if we cannot satisfy the standards established by testing and athletic governing bodies.

Our products are designed to satisfy the standards established by a number of regulatory and testing bodies, including the Department of Transportation, the CPSC, HECC, CSA, NOCSAE and the Snell Memorial Foundation, as well as by athletic organizations and governing bodies, including the NFL, NHL, MLB, NCAA and Little League Baseball and Softball. In addition, conferences within these athletic organizations have their own standards that can be stricter than the standards promulgated by the organizations themselves. For certain products, we rely on our in-house testing equipment to ensure that such products comply with these standards. We cannot assure you that our future products will satisfy these standards, that our in-house testing equipment will produce the same results as the equipment used by the applicable testing bodies, athletic organizations and governing bodies or that existing standards will not be altered in ways that adversely affect our brands and the sales of our products, which has occurred in the past. Any failure to comply with applicable standards could have a material adverse effect on our business.

The loss of one or more key customers could result in a material loss of revenues.

Our customers do not have any contractual obligations to purchase our products in the future. For the fiscal year ended January 1, 2011, our top 10 customers collectively accounted for approximately 33.6% of our net sales, and Wal-Mart, our largest customer, accounted for approximately 13.9% of our net sales. We face the risk that one or more of these key customers may not increase their business with us as we expect, may significantly decrease their business with us, may negotiate lower prices or may terminate their relationship with us altogether. The failure to increase our sales to these customers would have a negative impact on our growth prospects and any decrease or loss of these key customers’ business could result in a material decrease in our net sales and net income. In addition, our customers in the retail industry are experiencing consolidation, contractions and financial difficulties. A large portion of our sales are to sporting goods retailers. Of these, many of our smaller retailers and some larger retailers are not strongly capitalized. Adverse conditions in the sporting goods retail industry can adversely impact the ability of retailers to purchase our products, or could lead retailers to request credit terms that would adversely affect our cash flow and involve significant risks of nonpayment. As a result, we may experience a loss of customers or the uncollectability of accounts receivable in excess of amounts against which we have reserved.

The cost of raw materials could affect our operating results.

The materials used by us, our suppliers and our manufacturers involve raw materials, including carbon-fiber, aluminum and petroleum-based products. Significant price fluctuations or shortages in petroleum or other raw materials, or the introduction of new and expensive raw materials, could have a material adverse effect on our cost of goods sold, operations and financial condition.

The seasonality of our sales may have an adverse effect on our operations and our ability to service our debt.

Our business is subject to seasonal fluctuations. This seasonality requires that we effectively manage our cash flows over the course of the year. If our sales were to fall substantially below what we would normally expect during particular periods, our annual financial results would be adversely impacted and our ability to service our debt may also be adversely affected. In addition, quarterly results may vary from year to year due to the timing of new product introductions, major customer shipments, inventory holdings of significant customers, adverse weather conditions and the sales mix of products sold. Accordingly, comparisons of quarterly information from our results of operations may not be indicative of our ongoing performance.

Our success is dependent on our ability to protect our worldwide intellectual property rights and if we are unable to enforce and protect our intellectual property rights, our competitive position may be harmed.

We rely on a combination of patent, trademark, and trade secret laws in the United States and other jurisdictions and contractual restrictions, such as confidentiality agreements, to protect certain aspects of our business. We also enter into invention assignment agreements with our employees and consultants. However, while we have selectively pursued patent and trademark protection in the United States, Europe, and Canada; in some countries we have not perfected important patent and trademark rights. Our success depends in part on our ability to protect our trademarks and patents from unauthorized use by others. If substantial unauthorized use of our intellectual property rights occurs, we may incur significant financial costs in prosecuting actions for infringement of our rights, as well as the loss of efforts by engineers and managers who must devote attention to these matters. We cannot be sure that our patents and trademarks, or other protections such as confidentiality, will be adequate to prevent imitation of our products and technology by others. We may be unable to prevent third parties from using our intellectual property without our authorization, particularly in countries where we have not perfected our proprietary rights, where the laws or law enforcement

practices do not protect our proprietary rights as fully as in the United States, or where intellectual property protection is otherwise limited or unavailable. In some foreign countries where intellectual property laws or law enforcement practices do not protect our proprietary rights as fully as in the United States, third-party manufacturers may be able to manufacture and sell imitation products and diminish the value of our brands. If we fail to obtain patent and trademark protection, maintain our existing patent and trademark rights, or prevent substantial unauthorized use of our technology and brands, we risk the loss of our intellectual property rights and competitive advantages we have developed, causing us to lose net sales and harm our business. Accordingly, we devote substantial resources to the establishment and protection of our trademarks, and patents and continue to evaluate the registration of additional trademarks, patents and service marks, as appropriate. We cannot guarantee that any of our pending applications will be approved by the applicable governmental authorities. Moreover, even if the applications will be approved, third parties may seek to oppose or otherwise challenge these registrations.

We cannot assure that any third party patents and trademarks for which we have obtained licenses are adequately protected to prevent imitation by others. If those third party owners fail to obtain or maintain adequate patent and trademark protection or prevent substantial unauthorized use of the licensed intellectual property, we risk the loss of our rights under the third party intellectual property and competitive advantages we have developed based on those rights.

We cannot assure that our actions taken to establish and protect our technology and brands will be adequate to prevent others from seeking to block sales of our products or to obtain monetary damages, based on alleged violation of their patents, trademarks or other proprietary rights. In addition, our competitors have obtained and may continue to obtain patents on certain features of their products, which may prevent us from offering such features on our products, may subject us to patent litigation, and in turn, could result in a competitive disadvantage to us. Moreover, third parties may independently develop technology or other intellectual property that is comparable with or similar to our own, and we may not be able to prevent their use of it.

Our best known brands and branded products include Easton, Bell, Giro and Riddell. We believe that these trademarked brands are a core asset of our business and are of great value to us. If we lose the use of a product name, our efforts spent building that brand will be lost and we will have to rebuild a brand for that product, which we may or may not be able to do. We also note that in connection with our acquisition of Easton, we agreed that certain affiliates of one of Parent’s members, Jas. D. Easton, Inc., have the right to continue to use the Easton brand name in certain product areas, although we retain ownership of the Easton mark. Although we do not intend to compete with these entities in such product areas, we also do not control such entities and therefore can make no assurances as to how they will conduct business under the Easton brand name.

Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.

From time to time, third parties have challenged our patents, trademark rights and branding practices, or asserted intellectual property rights that relate to our products and product features. We may be required to defend such claims in the future, which, whether or not meritorious, could result in substantial costs and diversion of resources and could negatively affect our results of operations or competitive position. Should we be found liable for infringement of the intellectual property rights of others, we may be required to enter into licensing agreements (if available on acceptable terms or at all), pay damages, or cease making certain of our products. We may also need to redesign or rename some of our products to avoid future infringement liability. For example, in 2010 we received an unfavorable judgment against us in relation to infringement of a hockey skate patent, which we have appealed. However, even in the event that we do not prevail, we would not expect the result to be material to our business. Moreover, our involvement in litigation against third parties based on infringement of our intellectual property rights presents some risk that our intellectual property rights could be challenged and invalidated. Any of the foregoing could cause us to incur significant costs and prevent us from manufacturing or selling certain of our products.

We are subject to product liability, warranty and recall claims and our insurance coverage may not cover such claims.

Our business exposes us to warranty claims and claims for product liability in the event products manufactured, designed or reconditioned by us actually or allegedly fail to perform as expected, or the use of these products results, or is alleged to result, in personal injury or death. We have various pending product liability cases against us. We vigorously defend or attempt to settle product liability cases brought against us. However, there is no assurance that we can successfully defend or settle all such cases. We believe that we are not currently subject to any material product liability claims not covered by insurance, although the ultimate outcome of these and future claims cannot presently be determined. Management obtains an actuarial analysis and has established an accrual for probable losses based on this analysis, which considers, among other factors, our Company’s previous claims history and available

information on alleged claims. However, due to the uncertainty involved with estimates, actual results could vary substantially from those estimates. Because product liability claims are part of the ordinary course of our business, we maintain product liability insurance, which we believe is adequate. Our insurance policies provide coverage against claims resulting from alleged injuries arising from our products sustained during the respective policy periods, subject to policy terms and conditions. The primary portion of our product liability coverage is written under a policy expiring in July 2011 with a $2,000 limit per occurrence excess of a $1,000, $50 and $500 self-insured retention for helmets, soft goods and all other products, respectively. Our first layer excess policy is written under a liability policy with a limit of $25,000 excess of $3,000 expiring in January 2012. We also carry a second layer excess liability policy providing an additional limit of $15,000 excess of $28,000 expiring January 2012, for a total limit of $43,000. We cannot assure you that this coverage will remain available in the future, that our insurers will be financially viable when payment of a claim is required, that the cost of such insurance will not increase, or that this insurance will ultimately prove to be adequate under our various policies. Furthermore, future rate increases might make insurance uneconomical for us to maintain. These potential insurance problems or any adverse outcome in any liability suit could create increased expenses which could harm our business. We are unable to predict the nature of product liability claims that may be made against us in the future with respect to injuries, diseases or other illnesses resulting from the use of our products or the materials incorporated in our products.

With regard to warranty claims, our actual product warranty obligation could materially differ from historical rates, which would oblige us to revise our estimated warranty liability accordingly. Adverse determinations of material product liability and warranty claims made against us could have a material adverse effect on our financial condition and could harm our reputation, reducing the success of our business.

In addition, if any of our products are, or are alleged to be defective, we may be required to or voluntarily participate in a recall of that product. For example, we recently conducted a voluntary recall of a single bicycle stem product line as a preventative measure. Although we have never had a material recall, if we were to recall one or more of our material products, it would be a substantial cost to us and our relationships with our customers could be irreparably harmed and could materially and adversely affect our business.

In addition to the matters discussed in the preceding paragraphs, our Company is, from time to time, a party to various other legal claims and actions incidental to its business, including, without limitation, employment-related and intellectual property infringement claims. Management believes that none of these claims or actions, either individually or in the aggregate, is material to its business or financial condition.

Our international sourcing and sales network subjects us to additional risks and costs, which may differ in each country in which we do business and may cause our profitability to decline.

During the fiscal year ended January 1, 2011, we purchased approximately $338.3 million of finished goods and raw materials from international third-party suppliers. A significant amount of these purchases were from vendors in Asia, the majority of which were located in mainland China. Most of what we purchase in Asia is finished goods rather than raw materials. We expect to increase our international sourcing in the future. In addition, a significant percentage of our net sales are to customers outside the United States, including Canada and Europe. Consequently, our business is subject to the risks generally associated with doing business abroad. We cannot predict the effect of various factors in the countries in which we sell our products or where our suppliers are located, including, among others: (i) recessionary trends in international markets; (ii) legal and regulatory changes and the burdens and costs of our compliance with a variety of laws, including trade restrictions and tariffs; (iii) difficulties in enforcing intellectual property rights; (iv) increases in transportation costs or delays; (v) work stoppages and labor strikes; (vi) fluctuations in exchange rates; (vii) political unrest, terrorism and economic instability, and (viii) limitations on repatriation of earnings. If any of these or other factors were to render the conduct of our business in a particular country undesirable or impractical, our business and financial condition could be adversely affected.

Our business is also subject to the risks associated with the enactment of additional United States or foreign legislation and regulations relating to exports or imports, including quotas, duties, taxes or other charges or restrictions. If imposed, such legislation and regulations could have a material adverse effect on our net sales and profitability.

We also may be adversely affected by significant fluctuations in the value of the United States dollar relative to other currencies. We generally purchase goods made by foreign manufacturers in United States dollars, and therefore, changes in the value of the United States dollar can have an immediate effect on the cost of our purchases. If we experience increased costs as a result of exchange rate fluctuations and we are unable to increase our prices to a level sufficient to compensate for such increased costs, our gross margins would decline and we could become less price-competitive with companies who manufacture their products in the United States.

Changes in foreign currency exchange or interest rates could affect our revenues and costs.

We are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to certain sales, royalty income, and product purchases of our international subsidiaries that are denominated in currencies other than their functional currencies. We are also exposed to foreign currency gains and losses resulting from domestic transactions that are not denominated in United States dollars, and to fluctuations in interest rates related to our variable rate debt. In some cases, as part of our risk management strategies, we may choose not to hedge our exposure to foreign currency exchange rate changes, or we may choose to maintain variable interest rate debt. If we misjudge these risks, there could be a material adverse effect on our operating results and financial position. Furthermore, we are exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in our consolidated financial statements due to the translation of the statements of income and balance sheets of our international subsidiaries into United States dollars. A significant portion of our production and sourcing and approximately 14.8% of our net sales in the fiscal year ended January 1, 2011 were denominated in foreign currencies and subject to exchange rate fluctuation risk. The reported revenues and expenses of our international subsidiaries would decrease if the United States dollar increased in value in relation to other currencies, including, the Canadian dollar, British pound, Euro and Taiwan dollar. Finally, changes in exchange rates for foreign currencies may reduce international demand for our products, increase our labor or supply costs in non-United States markets, or reduce the United States dollar value of revenue we receive from other markets. These and other economic factors could have an adverse effect on demand for our products and services and on our financial condition and operating results.

Our results of operations may suffer if we are not able to adequately forecast demand for our products.

To reduce purchasing costs and ensure supply, we place orders with our suppliers far in advance of the time period we expect to deliver our products. However, a large portion of our products are sold into consumer markets that are difficult to accurately forecast. If we fail to accurately forecast demand for our products, we may experience excess inventory levels or inventory shortages. Factors that could affect our ability to accurately forecast demand for our products include:

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changes in consumer demand for our products or the products of our competitors;

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new product introductions by our competitors;

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failure to accurately forecast consumer acceptance of our products;

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adverse weather during key sporting seasons;

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unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction or increase in the rate of reorders placed by retailers;

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weakening of economic conditions or consumer confidence in future economic conditions, which could reduce demand for discretionary items, such as our products;

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terrorism or acts of war, or the threat thereof, which could adversely affect consumer confidence and spending or interrupt production and distribution of products and raw materials; and

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general economic conditions.

Inventory levels in excess of consumer demand may result in inventory write-downs and the sale of excess inventory at discounted prices, which could significantly harm our operating results and impair the value of our brands. Inventory shortages may result in unfulfilled orders, negatively impact customer relationships, diminish brand loyalty and result in lost net sales, any of which could harm our business.

Many of our products or components of our products are provided by a limited number of third-party suppliers and manufacturers and, because we have limited control over these parties, we may not be able to obtain quality products on a timely basis or in sufficient quantities.

We rely on a limited number of suppliers and manufacturers for many of our products and for many of the components in our products. During the fiscal year ended January 1, 2011, approximately 32.3% of our raw materials for the products we manufacture were sourced from international suppliers. In addition, a substantial portion of our products are manufactured by third-party manufacturers, and during the fiscal year ended January 1, 2011, approximately 190 international manufacturers produced approximately 93.6% of our purchased finished goods. We do not generally maintain long-term contracts with our third-party suppliers and manufacturers, and we compete with other businesses for raw materials, production capacity and capacity within applicable import quotas.

Should our current third-party manufacturers become incapable of meeting our manufacturing requirements in a timely manner or cease doing business with us for any reason, our business and financial condition could be adversely affected. If we experience significant increased demand, or need to replace an existing manufacturer, there can be no assurance that additional supplies of raw materials or additional manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any supplier or manufacturer would allocate sufficient capacity to us in order to meet our requirements. In addition, should we decide to transition existing in-house manufacturing to third-party manufacturers, the risk of such a problem could increase. Even if we are able to expand existing or find new manufacturing sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. For example, we experienced quality issues when the manufacturing of composite baseball and softball bats was outsourced, which led to an increase in returns of defective bats in 2008. The issue was successfully addressed by working with the supplier in Asia to improve process controls to allow for the identification and resolution of quality issues prior to products being sold into the marketplace. Any material delays, interruption or increased costs in the supply of raw materials or manufacture of our products could have an adverse effect on our ability to meet customer demand for our products and result in lower revenues and net income both in the short and long term.

In addition, there can be no assurance that our suppliers and manufacturers will continue to provide raw materials and to manufacture products that are consistent with our standards and that comply with all applicable laws and regulations. We have occasionally received, and may in the future receive shipments of products that fail to conform to our quality control standards. In that event, unless we are able to obtain replacement products in a timely manner, we risk the loss of net sales resulting from the inability to sell those products and could incur related increased administrative and shipping costs. If we are unable to sell products, we could lose trademark registrations applicable to those products for failure to make use of the mark. Any violation of our policies or any applicable laws and regulations by our suppliers or manufacturers could interrupt or otherwise disrupt our sourcing, adversely affect our reputation or damage our brand image. While we do not control these suppliers, manufacturers or licensees or their labor practices, a negative publicity regarding the production methods of any of our suppliers, manufacturers or licensees could adversely affect our reputation and sales and force us to locate alternative suppliers, manufacturing sources or licensees.

The success of our business is dependent upon our information systems.

Our ability to effectively manage and maintain our inventory, process transactions, ship products to our customers on a timely basis and maintain cost-efficient operations is dependent on information technology and on our information systems. We continue to plan for our long-term growth by investing in operations management and infrastructure. We may experience difficulties in operating our business under our current ERP system, any of which could disrupt our operations, including our ability to timely ship and track product orders to customers, project inventory requirements, manage our supply chain and otherwise adequately service our customers.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results. As a result, current and potential investors could lose confidence in our financial reporting.

Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports, our business and operating results could be harmed. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement.

Any failure to implement and maintain the improvements in the controls over our financial reporting, or difficulties encountered in the implementation of these improvements in our controls, could cause us to fail to meet our reporting obligations. Any failure to improve our internal controls to address an identified weakness could also cause investors to lose confidence in our reported financial information, which could have a negative impact on our Company. There can be no assurance that we will not discover weaknesses in our internal control over financial reporting in the future.

Our current executive officers, management and key employees are critical to our success, and the loss of any of these individuals could harm our business, brands and image.

The success of our business is dependent upon the management and leadership skills of Paul Harrington, our President and Chief Executive Officer, members of our senior management team and other key personnel, including certain members of our product development team. Competition for these individuals’ talents is intense, and we may not be able to attract and retain a sufficient number of qualified personnel in the future. Our Company does not currently maintain any key man insurance coverage, and the loss of any such personnel or the inability to attract and retain key personnel could delay the development and introduction of new products, harm our ability to sell our products, damage the image of our brands and prevent us from executing our business strategy.

We may not succeed in integrating an acquisition into our operations, which could have a material adverse effect on our operations, results of operations and financial condition.

We may continue to expand our business and operations through strategic acquisitions. The value of our Company will be affected by our ability to achieve the benefits expected from any strategic acquisitions we may undertake in the future. Achieving these benefits will depend in part upon meeting the challenges inherent in the successful combination of these enterprises. In particular, we may have difficulty and may incur unanticipated expenses related to integrating management, personnel and operations generally. Such an acquisition may also cause a substantial diversion of our management’s attention from day-to-day operations, and the assumption of liabilities of an acquired business, including unforeseen liabilities. Additionally, we may not be able to achieve any anticipated cost savings for many reasons, including an inability to take advantage of expected tax savings. Failure to integrate these acquisitions successfully may have a material adverse effect on our business, results of operations and financial condition.

Employment related matters, such as unionization, may affect our profitability.

As of January 1, 2011, approximately 50 of our 2,710 employees were unionized. Although we have good labor relations with these unionized employees, we have little control over union activities and could face difficulties in the future. Our collective bargaining agreement with a union in York, Pennsylvania covering approximately 40 employees expires in December 2012. Our collective bargaining agreement with a union in Mount Vernon, New York covering approximately 10 employees expires in January 2012. Labor organizing activities could result in additional employees becoming unionized. We cannot assure you that we will be able to negotiate new collective bargaining agreements on similar or more favorable terms or that we will not experience work stoppages or other labor problems in the future at our unionized and non-union facilities. We could experience a disruption of our operations or higher ongoing labor costs, which could have an adverse effect on our business and financial condition.

In addition, labor disputes at our suppliers or manufacturers create significant risks for our business, particularly if these disputes result in work slowdowns, lockouts, strikes or other disruptions during our peak importing or manufacturing seasons, and could have an adverse effect on our business, potentially resulting in cancelled orders by customers, unanticipated inventory accumulation or shortages and reduced net revenues and net income.

Acts of war, terrorism or epidemics may have an adverse effect on our business.

Acts of war, terrorism or epidemics may have an adverse effect on the economy generally, and more specifically on our business. Among various other risks, such occurrences have the potential to significantly decrease consumer spending on leisure products and activities, adversely impact our ability to consummate future debt or equity financings and negatively affect our ability to manufacture, source and deliver our products in a timely manner.

We may be subject to potential environmental liability.

We are subject to many federal, state and local requirements relating to the protection of the environment, and we have made and will continue to make expenditures to comply with such requirements. Past and present manufacturing operations subject us to environmental laws that regulate the use, handling and contracting for disposal or recycling of hazardous or toxic substances, the discharge of particles into the air and the discharge of process wastewaters into sewers. We believe that our operations are in substantial compliance with these laws and regulations and we do not believe that future compliance with such laws and regulations will have a material adverse effect on our results of operations, financial condition and cash flow. If environmental laws become more stringent, our capital expenditures and costs for environmental compliance could increase. Under applicable environmental laws we may also become liable for the remediation of contaminated properties, including properties currently or previously owned, operated or acquired by us and properties where wastes generated by our operations were disposed. Such liability can be imposed regardless of whether we were responsible for creating the contamination. We do not believe that any of our existing remediation obligations, including at third-party sites, will have a material adverse effect on our financial results. However, due to the possibility of unanticipated factual or regulatory developments, the amount and timing of future environmental expenditures could vary substantially from those currently anticipated and could have a material adverse effect on our financial results.

Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity.

The labeling, distribution, importation and sale of our products are subject to extensive regulation by various federal agencies, including the Federal Trade Commission, or FTC, CPSC, and state attorneys general in the United States, as well as by various other federal, state, provincial, local and international regulatory authorities in the countries in which our products are manufactured, distributed or sold. If we fail to comply with those regulations, we could become subject to significant penalties or claims, which could harm our results of operations or our ability to conduct our business. In addition, the adoption of new regulations or changes in the interpretation of existing regulations may result in significant compliance costs or discontinuation of product sales and may impair the marketing of our products, resulting in significant loss of net sales. We recently became aware that a U.S. Senator has requested that the FTC investigate football helmet manufacturers’ alleged misleading safety claims and deceptive practices in the selling of new football helmets and reconditioning of used ones. While our Riddell brand is specifically mentioned in the investigation request, we believe any allegations against us are unfounded and unfair. If such FTC investigations are initiated, they remain confidential. In all circumstances, we will work with the FTC and the Senator’s office to respond to their concerns.

The value of our brand and sales of our products could be diminished if we, the athletes who use our products or the sport categories in which we compete, are associated with negative publicity.

We sponsor a variety of athletes and feature those athletes in our advertising and marketing materials, and many athletes and teams use our products, including those teams or leagues for which we are an official supplier. Actions taken by athletes, teams or leagues associated with our products that harm the reputations of those athletes, teams or leagues could also harm our brand image and result in a material decrease in our net sales, net income, and cash flows which could have a material adverse effect on our financial condition and liquidity. We may also select athletes who are unable to perform at expected levels or who are not sufficiently marketable, which could also have an adverse effect on our business. If we are unable in the future to secure prominent athletes and arrange athlete endorsements of our products on terms we deem to be reasonable, we may be required to modify our marketing platform and to rely more heavily on other forms of marketing and promotion, which may not prove to be as effective or may result in additional costs. Also, union strikes or lock-outs affecting play could negatively impact the popularity of a sport, which could have a material adverse effect on our net sales of products used in that sport. Furthermore, negative publicity resulting from severe injuries or death occurring in the sports in which our products are used could negatively affect our reputation and result in restrictions or bans on the use of our products. For example, national media recently reported on the results of several scientific studies suggesting that concussive injuries associated with football may increase rates of various physical and mental disabilities among players. In response to these reports, the House Judiciary Committee held hearings to discuss the NFL’s efforts to protect players from head injury. If the popularity of football among players and fans were to decrease due to these risks or the associated negative publicity, sales of certain of our products could decrease and it could have a negative impact on our net sales, profitability and operating results. In addition, we could become exposed to additional claims and litigation relating to the use of our products and our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about our products.

In addition, in response to injuries or death caused by balls hit off different types of non-wood bats, some state legislatures and other national and local governing bodies have introduced bills and rules to ban certain types of non-wood bats from use in youth and adult sports. If we are unable to adapt our products to the standards that may or have already been developed, it could have a negative impact on our operating results.

Recent turmoil in the financial markets could increase our cost of borrowing and impede access to or increase the cost of financing our operations and investments.

United States and global credit and equity markets have recently undergone significant disruption, making it difficult for many businesses to obtain financing on acceptable terms. In addition, equity markets are continuing to experience rapid and wide fluctuations in value. If these conditions continue or worsen, our cost of borrowing may increase and it may be more difficult to obtain financing for our operations or investments. In addition, our borrowing costs can be affected by short and long-term debt ratings assigned by independent rating agencies which are based, in significant part, on our performance as measured by credit metrics such as interest coverage and leverage ratios. A decrease in these ratings could increase our cost of borrowing and/or make it more difficult for us to obtain financing in the future. The disruption in the global financial markets has also impacted some of the financial institutions with which we do business and may impair the ability of banks to honor draws on the ABL Facility (as defined below). A sustained decline in the financial stability of financial institutions could affect our ability to secure credit-worthy counterparties for our interest rate and foreign currency hedging programs and could affect our ability to settle existing contracts.

There could be a number of other effects from the disruption of the credit markets on our business, including insolvency of key suppliers resulting in product delays; inability of customers, including channel partners, to obtain credit to finance purchases of our products; potential insolvencies of such customers or channel partners; and failure of derivative counterparties and other financial institutions negatively impacting our treasury operations.

Our substantial indebtedness could adversely affect our financial health.

We have a significant amount of indebtedness. As of January 1, 2011, we had total indebtedness of approximately $389.0 million (including $350.0 million of our 9.750% senior secured notes due 2016, or the Notes, $38.9 million under our senior secured asset-based revolving credit facility, or ABL Facility, and $0.1 million of capital lease obligations). For more information on our indebtedness, see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Subject to the limits that are contained in certain of the documents governing our indebtedness, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify. Specifically, our high level of debt could have important consequences, including the following:

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making it more difficult for us to satisfy our obligations with respect to the Notes and our other debt;

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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

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requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

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increasing our vulnerability to general adverse economic and industry conditions;

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exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;

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limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

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inhibiting our ability to pay fees and invest resources to maintain or expand our portfolio of intellectual property assets or to comply with license terms concerning intellectual property assets;

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placing us at a disadvantage compared to other less leveraged competitors; and

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increasing our cost of borrowing.

Certain of the documents governing our indebtedness contain financial and other restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt. In addition, our indirect parent company, EB Sports, has entered into the New Holdco Facility (as defined below) pursuant to which it has borrowed $108.3 million. Neither our Company nor any of our subsidiaries have guaranteed or are otherwise obligated to repay such indebtedness or any interest that accrues thereon. However, given that EB Sports controls RGB, our direct parent, EB Sports has the ability, subject to the terms of the ABL Facility and any other agreements which limit our ability to declare and pay dividends, to obtain money from us and our subsidiaries to fund its obligations under such loan. Borrowings under the New Holdco Facility are secured by a pledge of all capital stock of RBG and our Company. This credit agreement is more fully described in “Item 13 — Certain Relationships and Related Transactions, and Director Independence.”

Despite current indebtedness levels, we may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.

We may be able to incur significant additional indebtedness in the future. Although certain of the documents governing our indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the additional indebtedness incurred in compliance with the documents governing our indebtedness could be substantial. These restrictions do not prevent us from incurring obligations that do not constitute indebtedness under the terms of the documents governing our indebtedness. In addition, the ABL Facility provided for unused commitments of approximately $162.9 million as of January 1, 2011. Furthermore, subject to availability under a borrowing base and certain other conditions, we may increase our borrowing availability under the ABL Facility by up to an additional $50.0 million. See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” To the extent new debt is added to our and our subsidiaries’ current debt levels, the substantial leverage risks described above would increase.

The terms of certain of the documents governing our indebtedness, may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

Certain of the documents governing our indebtedness contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in activities that may be in our long-term best interests, including, among other things, restrictions in the ABL Facility and the other documents governing our indebtedness on our ability to:

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incur additional indebtedness and issue capital stock;

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pay dividends or make other distributions or repurchase or redeem our capital stock;

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make certain loans and investments;

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enter into sale and leaseback transactions;

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transfer or sell assets;

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incur certain liens;

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enter into transactions with affiliates;

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alter the businesses we conduct;

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enter into agreements restricting our subsidiaries’ ability to pay dividends; and

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consolidate, merge or sell all or substantially all of our assets.

Under the ABL Facility, there are limitations on our ability to incur the full $250.0 million of commitments. Our availability is limited to the lesser of a borrowing base and $250.0 million (and, in the case of the Canadian borrowers, the lesser of a Canadian based borrowing base and $30.0 million, the size of the Canadian sub-facility). The borrowing base for our and our Canadian borrowers is and will be calculated on a monthly (or more frequent under certain circumstances) valuation of our inventory, accounts receivable and certain cash balances. As a result, our access to credit under the ABL Facility will potentially be subject to significant fluctuation, depending on the value of the applicable borrowing base eligible assets as of any measurement date. In addition, if our excess gross availability falls below a specified percentage of our gross borrowing base, we will be required to satisfy and maintain on a monthly basis, a minimum fixed charge coverage ratio test. Our ability to meet the required minimum fixed charge coverage ratio can be affected by events beyond our control, and we cannot assure you that we will meet this ratio. Moreover, the ABL Facility provides the administrative agent considerable discretion to impose reserves or availability blocks, which could materially impair the amount of borrowings that would otherwise be available to us and the Canadian borrowers. There can be no assurance that the administrative agent under the ABL Facility will not impose such actions during the term of the ABL Facility and further, was it to do so, the resulting impact of this action could materially and adversely impair our ability to make interest payments on the Notes. The inability to borrow under the ABL Facility may adversely affect our and our Canadian subsidiaries’ liquidity, financial position and results of operations. As of January 1, 2011, we estimated our borrowing capacity under the ABL Facility would have been approximately $162.9 million, after giving effect to outstanding borrowings of $38.9 million, other customary reserves and $3.3 million of outstanding letters of credit. Because the borrowing capacity under the ABL Facility depends, in part, on inventory, accounts receivable and other assets that fluctuate from time to time, such amount may not reflect actual borrowing capacity.

A breach of the covenants under certain of the documents governing our indebtedness could result in an event of default under the applicable documents governing our indebtedness. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the ABL Facility would permit the lenders under the ABL Facility to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under the ABL Facility, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or noteholders accelerate the repayment of our borrowings, we cannot assure that we and our subsidiaries would have sufficient assets to repay such indebtedness. As a result of these restrictions, we may be:

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limited in how we conduct our business;

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unable to raise additional debt or equity financing to operate during general economic or business downturns; or

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unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our plans.

Our variable rate indebtedness will subject us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.

Borrowings under the ABL Facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such alternative actions may not allow us to meet our scheduled debt service obligations. Certain of the documents governing our indebtedness restrict our ability to dispose of assets and use the proceeds from any such dispositions and also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

In addition, we hold a substantial portion of our assets and conduct substantially all of our operations through our subsidiaries, certain of which are not guarantors of our indebtedness. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Unless they are guarantors of our indebtedness, our subsidiaries do not have any obligation to pay amounts due our indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the agreements governing certain of our existing indebtedness limit the ability of certain of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to certain qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the Notes.

If we cannot make scheduled payments on our debt, we will be in default and, as a result, holders of any of our debt could declare all outstanding principal and interest to be due and payable, the lenders under the ABL Facility could terminate their commitments to loan money, our secured lenders could foreclose against the assets securing such borrowings and we could be forced into bankruptcy or liquidation, in each case, which could result in you losing your investment.

In addition to our obligations on our indebtedness discussed above, we expect to make distributions to EB Sports to fund cash payments under the New Holdco Facility. On December 3, 2009, EB Sports refinanced its senior unsecured credit agreement, or the Previous Holdco Facility, with Wachovia Investment Holdings, LLC and the lenders named therein, pursuant to which EB Sports had borrowed $175.0 million, through a new senior secured credit agreement with Wachovia Bank, N.A. and the existing lenders under the Previous Holdco Facility, the New Holdco Facility, with Wachovia Investment Holdings, LLC and the existing lenders under the Previous Holdco Facility and an equity investment from Fenway Easton-Bell Sports Holding, LLC and Fenway Partners Capital Fund III, L.P., or together the Fenway Investors, each an affiliate of Fenway Partners, LLC, and certain existing investors and their affiliates. As of January 1, 2011, the amount of loans issued under the New Holdco Facility was approximately $122.5 million, including accrued interest. EB Sports depends on us and our subsidiaries, who conduct the operations of the business, for dividends and other payments to generate the funds necessary to meet its financial obligations, including payments of principal and interest on the New Holdco Facility. The borrowings under the New Holdco Facility are scheduled to mature on December 31, 2015. See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

The New Holdco Facility is secured by a pledge of all of the capital stock of RBG and Easton-Bell. The New Holdco Facility is guaranteed by RBG and any subsidiary of EB Sports that in the future guarantees other indebtedness of EB Sports or RBG. Borrowings under the New Holdco Facility through May 1, 2012 will bear interest at 11.5% per annum and EB Sports may elect to pay interest in cash or defer interest by adding it to the aggregate amount of principal due under the loan. Interest after May 1, 2012 will be paid in cash; provided, that if prior to maturity EB Sports does not have sufficient cash on hand and we are either prohibited from distributing sufficient cash to EB Sports to make such interest payments or we do not have sufficient liquidity (in the reasonable determination of our management) to permit us to distribute cash in an amount sufficient to allow such payment, then EB Sports will pay cash to the extent it is able to do so using cash on hand after giving effect to permitted and available distributions, and the remainder of the interest due shall be added to the principal amount of the loan at a rate of 13.5% per annum for the then ending interest period.

Certain of the documents governing our indebtedness restrict us and certain of our subsidiaries from, in each case, paying dividends or otherwise transferring assets to EB Sports. Such restrictions include, among others, prohibitions on payment of dividends in the event of default and limitations on the amount of dividends and other restricted payments to our parent entities, although certain of the documents, include exceptions to permit the payment of dividends and other distributions to service interest and refinance principal under the New Holdco Facility, provided that certain financial conditions have been satisfied. In addition, legal and contractual restrictions in agreements governing current and future indebtedness, as well as the financial condition and operating requirements of EB Sports’ subsidiaries, currently limit and may in the future limit EB Sports’ ability to obtain cash from us. Our earnings or available assets may not be sufficient to meet our payment obligations under the New Holdco Facility.

Our ability to make restricted payments (including payments to EB Sports to service its obligations) is limited by the terms of certain of the documents governing our indebtedness. Delaware law also requires that we be solvent both at the time, and immediately following, a restricted payment to EB Sports. Because EB Sports will rely on dividends from us to fund all cash payments under the New Holdco Facility, in the event that such restrictions prevent us from paying such a dividend, EB Sports would be unable to make payments which would result in an event of default under the New Holdco Facility.

If EB Sports is unable to pay borrowings under the New Holdco Facility, when due at maturity, an event of default will occur, which would permit the lenders to enforce their rights under the pledge agreement entered into in connection with the New Holdco Facility. If the lenders were to foreclose on collateral or exercise voting rights with respect to the pledged stock under the pledge agreement this would also result in a change of control under the terms of certain of the documents governing our indebtedness, which would require us to repay all loans outstanding under certain of the documents governing our indebtedness and/or to offer to repurchase all of the outstanding Notes.

The Notes are effectively subordinated to our and our subsidiary guarantors’ indebtedness under the ABL Facility and our other secured indebtedness to the extent of the value of the property securing such indebtedness on a basis senior to the Notes.

The Notes and the guarantees are effectively subordinated to our and our subsidiary guarantors’ indebtedness under the ABL Facility with respect to the assets that secure the indebtedness under the ABL Facility on a first-priority basis. The effect of this subordination is that upon a default in payment on, or the acceleration of, any indebtedness under the ABL Facility or other indebtedness secured by such assets on a first-priority basis, or in the event of bankruptcy, insolvency, liquidation, dissolution, reorganization or similar proceeding of us or any of the subsidiary guarantors of the ABL Facility or of such other secured debt, the proceeds from the sale of assets securing the ABL Facility and/or such other secured indebtedness on a first-priority basis will be available to pay obligations on the Notes only after all indebtedness under the ABL Facility and such other secured debt has been paid in full.

The Notes are structurally subordinated to all indebtedness of those of our existing or future subsidiaries that are not, or do not become, guarantors of the Notes.

The Notes are guaranteed by each of our existing and subsequently acquired or organized domestic subsidiaries that guarantee the ABL Facility or that, in the future, guarantee other debt issued by our Company or the subsidiary guarantors of the Notes. Except for such subsidiary guarantors of the Notes, our subsidiaries, including all of our non-domestic subsidiaries, will have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment. The Notes are structurally subordinated to all indebtedness and other obligations of any non-guarantor subsidiary such that, in the event of insolvency, liquidation, reorganization, dissolution or other winding up of any subsidiary that is not a guarantor, all of such subsidiary’s creditors (including trade creditors and preferred stockholders, if any) would be entitled to payment in full out of such subsidiary’s assets before we would be entitled to any payment.

In addition, the indenture governing the Notes, subject to some limitations, permit these subsidiaries to incur additional indebtedness and does not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by these subsidiaries.

For the twelve months ended January 1, 2011, our non-guarantor subsidiaries represented approximately 11.4% of our net sales, 13.7% of operating income and 9.6% of EBITDA. As of January 1, 2011, our non-guarantor subsidiaries represented $148.5 million of our assets and had $76.4 million of total liabilities, including debt and trade payables.

In addition, our subsidiaries that provide guarantees of the Notes will be automatically released from such guarantees upon the occurrence of certain events, including the following:

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the designation of such subsidiary guarantor as an unrestricted subsidiary;

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the release or discharge of all guarantees or indebtedness that resulted in the creation of the guarantee of the Notes by such subsidiary guarantor; or

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the sale or other disposition, including the sale of substantially all the assets, of such subsidiary guarantor.

If any such subsidiary guarantee is released, no holder of the Notes will have a claim as a creditor against any such subsidiary and the indebtedness and other liabilities, including trade payables and preferred stock, if any, whether secured or unsecured, of such subsidiary will be effectively senior to the claim of any holders of the Notes.

Because each guarantor’s liability under its guarantees may be reduced to zero, avoided or released under certain circumstances, you may not receive any payments from some or all of the guarantors.

The Notes have the benefit of the guarantees of the guarantors. However, the guarantees by the guarantors are limited to the maximum amount that the guarantors are permitted to guarantee under applicable law. As a result, a guarantor’s liability under its guarantee could be reduced to zero, depending upon the amount of other obligations of such guarantor. Further, under certain circumstances, a court under federal and state fraudulent conveyance and transfer statutes could void the obligations under a guarantee or further subordinate it to all other obligations of the guarantor. In addition, you will lose the benefit of a particular guarantee if it is released under certain circumstances.

The value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. Consequently, liquidating the collateral securing the Notes may not produce proceeds in an amount sufficient to pay any amounts due on the Notes.

A portion of the collateral securing the Notes is subject to first-priority liens in favor of the lenders under the ABL Facility. As a result, upon any distribution to our creditors, liquidation, reorganization or similar proceedings, or following acceleration of our indebtedness or an event of default under our indebtedness, the lenders under the ABL Facility will be entitled to be repaid in full from the proceeds of the assets securing the ABL Facility on a first-priority basis before any payment is made to you from the proceeds of that collateral. In addition, the terms of the indenture relating to the Notes will permit the incurrence of additional debt that may be secured by these or other assets on a first-priority basis. The incurrence of such debt would dilute the value of the liens on such collateral securing the Notes.

As of January 1, 2011, the book values of the real estate, intellectual property, customer relationships and plant and equipment assets included in the first-priority collateral were $0.1 million, $249.9 million, $23.5 million and $49.0 million, respectively. The fair market value of the collateral securing the Notes is subject to fluctuations based on factors that include, among others, the condition of the markets for various forms of collateral, the ability to sell the collateral in an orderly sale, general economic conditions, the availability of buyers and similar factors. The amount to be received upon a sale of the collateral would be dependent on numerous factors, including but not limited to the actual fair market value of the collateral at such time and the timing and the manner of the sale. By their nature, portions of the collateral may be illiquid and may have no readily ascertainable market value. Likewise, we cannot assure holders of the Notes that the collateral will be saleable or, if saleable, that there will not be substantial delays in their liquidation. To the extent that liens, rights and easements granted to third parties encumber assets located on property owned by us or constitute subordinate liens on the collateral, those third parties may have or may exercise rights and remedies with respect to the property subject to such encumbrances (including rights to require marshalling of assets) that could adversely affect the value of the collateral located at that site and the ability of the collateral agent to realize or foreclose on the collateral at that site. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, we cannot assure you that the proceeds from any sale or liquidation of the collateral will be sufficient to pay our obligations under the Notes. In addition, the asset sale covenant and the definition of asset sale in the indenture governing the Notes, have a number of significant exceptions pursuant to which we may be able to sell assets securing the Notes without being required to reinvest the proceeds of such sale into assets that will comprise collateral securing the Notes or to make an offer to the holders of the Notes to repurchase the Notes.

In the event of a bankruptcy of us or any of the guarantors, holders of the Notes may be deemed to have an unsecured claim to the extent that our obligations in respect of the Notes exceed the fair market value of the collateral securing the Notes.

In any bankruptcy proceeding with respect to us or any of the guarantors, it is possible that the bankruptcy trustee, the debtor-in-possession or competing creditors will assert that the fair market value of the collateral with respect to the Notes on the date of the bankruptcy filing was less than the then-current principal amount of the Notes. Upon a finding by the bankruptcy court that the Notes are under-collateralized, the claims in the bankruptcy proceeding with respect to the Notes would be bifurcated between a secured claim and an unsecured claim, and the unsecured claim would not be entitled to the benefits of security in the collateral. Other consequences of a finding of under-collateralization would be, among other things, a lack of entitlement on the part of the Notes to receive post-petition interest and a lack of entitlement on the part of the unsecured portion of the Notes to receive other “adequate protection” under federal bankruptcy laws. In addition, if any payments of post-petition interest had been made at the time of such a finding of under-collateralization, those payments could be recharacterized by the bankruptcy court as a reduction of the principal amount of the secured claim with respect to the Notes.

The collateral securing the Notes may be diluted under certain circumstances.

The collateral that secures the Notes also secures our obligations under the ABL Facility. This collateral may also secure additional senior indebtedness, including additional Notes, that we incur in the future, subject to restrictions on our ability to incur debt and liens under certain of the documents governing our indebtedness. Your rights to the collateral would be diluted by any increase in the indebtedness secured by this collateral.

The rights of holders of the Notes to the collateral securing the ABL Facility, in which such holders have a second-priority lien, are materially limited by the intercreditor agreement.

The rights of the holders of the Notes with respect to the collateral securing the ABL Facility, which secures the Notes on a second-priority basis, are limited pursuant to the terms of an intercreditor agreement with the lenders under the ABL Facility.

Under the intercreditor agreement, any actions that may be taken in respect of that collateral (including the ability to commence enforcement proceedings against that collateral and to control the conduct of such proceedings, and to approve amendments to, releases of that collateral from the lien of, and waivers of past defaults under, the collateral documents) will be at the direction of the lenders under the ABL Facility. Under those circumstances, the collateral agent on behalf of the holders of the Notes, with limited exceptions, will not have the ability to control or direct such actions, even if the rights of the holders of the Notes are adversely affected. Any release by the lenders under the ABL Facility of their collateral that secures the ABL Facility (other than a termination of the ABL Facility or a release of all the collateral securing the ABL Facility) on a first-priority basis will also release the second-priority lien securing the Notes on the same collateral (subject to the interest of the holders of the Notes in the proceeds of that collateral), and holders of the Notes will have no control over such release. In addition, because the holders of the indebtedness secured by first-priority liens control the disposition of such collateral, such holders could decide not to proceed against such collateral, regardless of whether there is a default under the documents governing such indebtedness or under the indenture governing the Notes. In such event, the only remedy available to the holders of the Notes would be recourse to collateral for the Notes which is secured on a first-priority basis and to sue for payment on the Notes and the related guarantees. In addition, the intercreditor agreement gives the holders of first-priority liens on the collateral securing the ABL Facility the right to access and use such collateral securing the Notes on a first lien basis to allow those holders to protect such collateral and to process, store and dispose of the collateral securing the ABL Facility.

The waiver in the intercreditor agreement of rights of marshaling may adversely affect the recovery rates of holders of the Notes in a bankruptcy or foreclosure scenario.

The Notes and the guarantees are secured on a second-priority lien basis by the collateral securing the ABL Facility. The intercreditor agreement provides that, at any time holders of the Notes hold a second-priority lien on the collateral where a first-priority lien on such collateral exists, the trustee under the indenture governing the Notes and the Notes collateral agent may not assert or enforce any right of marshaling accorded to a junior lienholder, as against the holders of such indebtedness secured by first-priority liens in the collateral securing the ABL Facility. Without this waiver of the right of marshaling, holders of such indebtedness secured by first-priority liens in the collateral securing the ABL Facility would likely be required to liquidate collateral on which the Notes did not have a lien, if any, prior to liquidating the collateral, thereby maximizing the proceeds of the collateral that would be available to repay our obligations under the Notes. As a result of this waiver, the proceeds of sales of the collateral securing the ABL Facility could be applied to repay any indebtedness secured by first-priority liens in the collateral securing the ABL Facility before applying proceeds of other collateral securing indebtedness, and the holders of Notes may recover less than they would have if such proceeds were applied in the order most favorable to the holders of the Notes.

Certain assets are excluded from the collateral securing the Notes.

Certain assets are excluded from the collateral securing the Notes including, among other things, any assets held by foreign subsidiaries, any assets in real property other than fee interests (including leaseholds), as well as other typical exclusions, such as capital stock of non-wholly owned subsidiaries if the pledge of such capital stock would violate a contractual obligation, letters of credit for identified purposes or a contract or license if the grant of a lien would violate a contract, license or agreement. In addition, the collateral does not include any capital stock of a subsidiary to the extent that the pledge of such capital stock results in our being required to file separate financial statements of such subsidiary with the SEC, and any such capital stock that triggers such a requirement to file financial statements of such subsidiary with the SEC would be automatically released from the collateral. However, the liens on such capital stock will continue to secure obligations under the ABL Facility. Further, the collateral does not include a pledge of our capital stock, which is pledged as collateral under the New Holdco Facility.

Your rights in the collateral may be adversely affected by the failure to perfect security interests in certain collateral acquired in the future.

Applicable law requires that certain property and rights acquired after the grant of a general security interest, such as rights in real property, can only be perfected at the time such property and rights are acquired and identified. Likewise, any rights acquired in a pending, unpublished intellectual property application may be unrecordable until after the application, or resulting registration, is published. There can be no assurance that the trustee or the collateral agent will monitor, or that we will inform the trustee or the collateral agent of, the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly perfect the security interest in such after-acquired collateral. The collateral agent for the Notes has no obligation to monitor the acquisition of additional property or rights that constitute collateral or the perfection of any security interest in favor of the Notes against third parties. Failure to perfect any such security interest could result in the loss of such security interest or the priority of the security interest in favor of the Notes against third parties.

Rights of holders of the Notes in the collateral may be adversely affected by the failure to create or perfect security interests in certain collateral on a timely basis, and a failure to create or perfect such security interests on a timely basis or at all may result in a default under the indenture and other agreements governing the Notes.

The Notes and the guarantees are secured by first-priority liens, subject to permitted liens, on certain of our and the subsidiary guarantors’ principal United States assets, other than assets pledged under the ABL Facility which secure the Notes and the subsidiary guarantees on a second-priority basis.

If we, or any subsidiary guarantor, were to become subject to a bankruptcy proceeding, any liens recorded or perfected after the issue date would face a greater risk of being invalidated than if they had been recorded or perfected on the issue date. Liens recorded or perfected after the issue date may be treated under bankruptcy law as if they were delivered to secure previously existing indebtedness. In bankruptcy proceedings commenced within 90 days of lien perfection, a lien given to secure previously existing debt is materially more likely to be avoided as a preference by the bankruptcy court than if delivered and promptly recorded on the issue date. Accordingly, if we or a subsidiary guarantor were to file for bankruptcy protection after the issue date of the outstanding Notes and the liens had been perfected less than 90 days before commencement of such bankruptcy proceeding, or not yet perfected at all, the liens securing the Notes may be especially subject to challenge as a result of having not been perfected before the issue date. To the extent that such challenge succeeded, you would lose the benefit of the security that the collateral was intended to provide.

Additionally, a failure, for any reason that is not permitted or contemplated under the security agreement and related documents, to perfect the security interest in the properties included in the collateral package may result in a default under the indenture and other agreements governing the Notes.

There are circumstances other than repayment or discharge of the Notes under which the collateral securing the Notes and guarantees will be released automatically, without your consent or the consent of the trustee.

Under various circumstances, collateral securing the Notes will be released automatically, including:

•

a sale, transfer or other disposal of such collateral in a transaction not prohibited under the indenture;

•

with respect to collateral held by a guarantor, upon the release of such guarantor from its guarantee;

•

with respect to collateral that is capital stock, upon the dissolution of the issuer of such capital stock in accordance with the indenture; and

•

with respect to collateral that secures the ABL Facility on a first-priority basis, upon any release, sale or disposition (other than in connection with a cancellation or termination of the ABL Facility) of such collateral pursuant to the terms of the ABL Facility resulting in the release of the lien on such collateral securing the ABL Facility.

In addition, the guarantee of a subsidiary guarantor will be automatically released in connection with a sale of such subsidiary guarantor in a transaction permitted under the indenture.

The indenture governing the Notes also permits us to designate one or more of our restricted subsidiaries that is a guarantor of the Notes as an unrestricted subsidiary. If we designate a subsidiary guarantor as an unrestricted subsidiary for purposes of the indenture governing the Notes, all of the liens on any collateral owned by such subsidiary or any of its subsidiaries and any guarantees of the Notes by such subsidiary or any of its subsidiaries will be released under the indenture but not necessarily under the ABL Facility. Designation of an unrestricted subsidiary will reduce the aggregate value of the collateral securing the Notes to the extent that liens on the assets of the unrestricted subsidiary and its subsidiaries are released. In addition, the creditors of the unrestricted subsidiary and its subsidiaries will have a senior claim on the assets of such unrestricted subsidiary and its subsidiaries.

The collateral securing the Notes is subject to casualty risks and potential environmental liabilities.

We intend to maintain insurance or otherwise insure against hazards in a manner appropriate and customary for our business. There are, however, certain losses that may be either uninsurable or not economically insurable, in whole or in part. For example, we cannot assure that we will obtain or maintain insurance against potential losses related to our intellectual property assets. Insurance proceeds may not compensate us fully for our losses. If there is a complete or partial loss of any of the pledged collateral, the insurance proceeds may not be sufficient to satisfy all of the secured obligations.

Moreover, the collateral agent for the Notes may need to evaluate the impact of potential liabilities before determining to foreclose on collateral consisting of real property because secured creditors that hold a security interest in real property may be held liable under environmental laws for the costs of remediating or preventing the release or threatened release of hazardous substances at such real property. Consequently, the collateral agent may decline to foreclose on such collateral or exercise remedies available in respect thereof if it does not receive indemnification to its satisfaction from the holders of the Notes.

We may not be able to repurchase the Notes upon a change of control.

Upon the occurrence of specific kinds of change of control events, we will be required to offer to repurchase all of the outstanding Notes at 101% of their principal amount, plus accrued and unpaid interest to the purchase date. Additionally, under the ABL Facility, a change of control (as defined therein) constitutes an event of default that permits the lenders to accelerate the maturity of borrowings under that agreement and the commitments to lend will terminate. The source of funds for any purchase of the Notes and repayment of our other credit facilities will be our available cash or cash generated from our subsidiaries’ operations or other sources, including borrowings, sales of assets or sales of equity. We may not be able to repurchase the Notes upon a change of control because we may not have sufficient financial resources to purchase all of the debt securities that are tendered upon a change of control and to repay our other indebtedness that will become due. We may require additional financing from third parties to fund any such purchases, and we cannot assure you that we would be able to obtain financing on satisfactory terms or at all. Further, our ability to repurchase the Notes may be limited by law. In order to avoid the obligations to repurchase the Notes and events of default and potential breaches of the credit agreement governing the ABL Facility, we may have to avoid certain change of control transactions that would otherwise be beneficial to our Company.

In addition, certain important corporate events, such as leveraged recapitalizations, may not, under the indenture governing the Notes, constitute a “change of control” that would require us to repurchase the Notes, notwithstanding the fact that such corporate events could increase the level of our indebtedness or otherwise adversely affect our capital structure, credit ratings or the value of the Notes.

In addition, in a recent decision, the Chancery Court of Delaware raised the possibility that a change of control put right occurring as a result of a failure to have “continuing directors” comprising a majority of a board of directors might be unenforceable on public policy grounds.

Holders of the Notes may not be able to determine when a change of control giving rise to their right to have the Notes repurchased has occurred following a sale of “substantially all” of our assets.

The definition of change of control in the indenture governing the Notes includes a phrase relating to the sale of “all or substantially all” of our assets. There is no precise established definition of the phrase “substantially all” under applicable law. Accordingly, the ability of a holder of Notes to require us to repurchase its Notes as a result of a sale of less than all our assets to another person may be uncertain.

In the event of our bankruptcy, the ability of the holders of the Notes to realize upon the collateral will be subject to certain bankruptcy law limitations.

The ability of holders of the Notes to realize upon the collateral are subject to certain bankruptcy law limitations in the event of our bankruptcy. Under applicable federal bankruptcy laws, upon the commencement of a bankruptcy case, an automatic stay goes into effect which, among other things, stays:

•

the commencement or continuation of any action or proceeding against the debtor that was or could have been commenced before the commencement of the bankruptcy case to recover a claim against the debtor that arose before the commencement of the bankruptcy case;

•

any act to obtain possession of, or control over, property of the bankruptcy estate or the debtor;

•

any act to create, perfect or enforce any lien against property of the bankruptcy estate; and

•

any act to collect or recover a claim against the debtor that arose before the commencement of the bankruptcy case.

Thus, upon the commencement of a bankruptcy case, secured creditors are prohibited from, among other things, repossessing their collateral from a debtor, or from disposing of such collateral repossessed from such a debtor, without bankruptcy court approval. Moreover, applicable federal bankruptcy laws generally permit the debtor to continue to use, sell or lease collateral in the ordinary course of its business even though the debtor is in default under the applicable debt instruments. Upon request from a secured creditor, the bankruptcy court will prohibit or condition such use, sale or lease of collateral as is necessary to provide “adequate protection” of the secured creditor’s interest in the collateral. The meaning of the term “adequate protection” may vary according to the circumstances, but is intended generally to protect the value of the secured creditor’s interest in the collateral at the commencement of the bankruptcy case and may include cash payments or the granting of additional security, if and at such times as the court in its discretion determines any diminution in the value of the collateral occurs as a result of the debtor’s use, sale or lease of the collateral during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of a United States bankruptcy court, we cannot predict whether payments under the Notes would be made following commencement of and during a bankruptcy case, whether or when the trustee or collateral agent under the indenture for the Notes could foreclose upon or sell the collateral or whether or to what extent holders of Notes would be compensated for any delay in payment or loss of value as a result of the use, sale or lease of their collateral through the requirement of “adequate protection.” A creditor may seek relief from the stay from the bankruptcy court to take any of the acts described above that would otherwise be prohibited by the automatic stay. The United States bankruptcy court has broad discretionary powers in determining whether to grant a creditor relief from the stay.

The value of the collateral securing the Notes may not be sufficient to secure post-petition interest.

In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding against us, holders of the Notes will only be entitled to post-petition interest under the bankruptcy code to the extent that the value of their security interest in the collateral is greater than their pre-bankruptcy claim. Holders of the Notes that have a security interest in the collateral with a value equal or less than their pre-bankruptcy claim will not be entitled to post-petition interest under the bankruptcy code. No appraisal of the fair market value of the collateral has been prepared in connection with this offering and we therefore cannot assure you that the value of the holders’ interest in the collateral equals or exceeds the principal amount of the Notes.

The interests of our sponsors may conflict with yours.

An investor group led by Fenway Partners Capital Fund II, L.P. (investing through Fenway Easton-Bell Sports Holding, LLC) and Fenway Partners Capital Fund III, L.P., each an affiliate of Fenway Partners, LLC, owns a majority of our Parent’s outstanding equity interests. As a result, these investors are in a position to control all matters affecting us, including decisions made by our board of directors, such as the appointment of members of our management and the approval of mergers or sales of substantially all of our assets. The Fenway Investors’ interests in exercising control over our business may conflict with your interests as a holder of the Notes.

Federal and state fraudulent transfer laws may permit a court to void the Notes, the guarantees and/or the grant of collateral and, if that occurs, you may not receive any payments on the Notes.

Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the Notes and the incurrence of the guarantees of such Notes. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the Notes or the guarantees thereof (or the grant of collateral securing any such obligations) could be voided as a fraudulent transfer or conveyance if we or any of the guarantors, as applicable, (a) issued the Notes or incurred the guarantees with the intent of hindering, delaying or defrauding creditors, or (b) received less than reasonably equivalent value or fair consideration in return for either issuing the Notes or incurring the guarantees and, in the case of (b) only, one of the following is also true at the time thereof:

•

we or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the Notes or the incurrence of the guarantees;

•

the issuance of the Notes or the incurrence of the guarantees left us or any of the guarantors, as applicable, with an unreasonably small amount of capital or assets to carry on the business;

•

we or any of the guarantors intended to, or believed that we or such guarantor would, incur debts beyond our or such guarantor’s ability to pay as they mature; or

•

we or any of the guarantors were a defendant in an action for money damages, or had a judgment for money damages docketed against us or such guarantor if, in either case, after final judgment, the judgment is unsatisfied.

As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or a valid antecedent debt is secured or satisfied. A court would likely find that a subsidiary guarantor did not receive reasonably equivalent value or fair consideration for its guarantee, to the extent such guarantor did not obtain a reasonably equivalent benefit directly or indirectly from the issuance of the Notes.

We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were insolvent at the relevant time or, regardless of the standard that a court uses, whether the Notes or the guarantees would be subordinated to our or any of our guarantors’ other debt. In general, however, a court would deem an entity insolvent if:

•

the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets;

•

the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

•

it could not pay its debts as they became due.

If a court were to find that the issuance of the Notes, the incurrence of a guarantee or the grant of security was a fraudulent transfer or conveyance, the court could void the payment obligations under the Notes or such guarantee or void the grant of collateral or subordinate the Notes or such guarantee to presently existing and future indebtedness of ours or of the related guarantor, or require the holders of the Notes to repay any amounts received with respect to such guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the Notes. Further, the avoidance of the Notes could result in an event of default with respect to our and our subsidiaries’ other debt that could result in acceleration of such debt.

Finally, as a court of equity, the bankruptcy court may subordinate the claims in respect of the Notes to other claims against us under the principle of equitable subordination, if the court determines that: (i) the holder of Notes engaged in some type of inequitable conduct; (ii) such inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage upon the holder of Notes; and (iii) equitable subordination is not inconsistent with the provisions of the bankruptcy code.

Your ability to transfer the Notes is limited by the absence of an active trading market and an active trading market may not develop for the Notes.

The Notes were new issues of securities for which there is no established trading market. We do not intend to list the Notes on any national securities exchange or include the Notes in any automated quotation system. The initial purchasers of the Notes have advised us that they intend to make a market in the Notes, as permitted by applicable laws and regulations; however, the initial purchasers are not obligated to make a market in the Notes and, if commenced, they may discontinue their market-making activities at any time without notice.

Therefore, an active market for the Notes may not develop or be maintained, which would adversely affect the market price and liquidity of the Notes. In such case, the holders of the Notes may not be able to sell their Notes at a particular time or at a favorable price.

Even if an active trading market for the Notes does develop, there is no guarantee that it will continue. Historically, and particularly in recent months, the market for non-investment grade debt has been subject to severe disruptions that have caused substantial volatility in the prices of securities similar to the Notes. The market, if any, for the Notes may experience similar disruptions and any such disruptions may adversely affect the liquidity in such market and/or the prices at which you may sell your Notes. In addition, subsequent to their initial issuance, the Notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, our performance and other factors.

A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital.

Our debt currently has a non-investment grade rating, and there can be no assurances that any rating assigned will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Credit ratings are not recommendations to purchase, hold or sell the Notes, and may be revised or withdrawn at any time. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the Notes. If any credit rating initially assigned to the Notes is subsequently lowered or withdrawn for any reason, you may not be able to resell your Notes without a substantial discount.

Item 1B.		Unresolved Staff Comments

None.

Item 2.		Properties

As of January 1, 2011 we operated 20 facilities in the United States, three in Canada, two in Mexico, two in Europe and three in Asia. Our corporate headquarters is located in Van Nuys, California. Set forth below is information regarding our principal properties:

Leased

Owned

Location

Primary Use

Business Segment

Sq. Ft.

Sq. Ft.

Van Nuys, CA

Corporate Headquarters and Offices

Team and Action Sports

56,647

Scotts Valley, CA

Offices and Research and Development

Team and Action Sports

55,320

Irving, TX

Offices

Action Sports

27,197

Rosemont, IL

Offices and Research and Development

Team Sports

20,531

Rantoul, IL

Offices, Manufacturing and Warehouse

Team and Action Sports

753,696

York, PA

Warehouse

Action Sports

465,000

Salt Lake City, UT

Warehouse

Team Sports

133,000

Elyria, OH

Offices, Reconditioning and Warehouse

Team Sports

134,788

Monterrey, Mexico

Reconditioning and Warehouse

Team Sports

117,328

Kirkland, Canada

Offices and Warehouse

Team Sports

97,935

Tijuana, Mexico

Offices, Manufacturing and Warehouse

Team and Action Sports

112,403

In addition to the primary facilities listed above, we operate other offices and facilities around the world totaling approximately 262,000 square feet. We consider each of our facilities to be in good condition and adequate for its present use. We believe that we have sufficient capacity to meet our current and anticipated manufacturing requirements.

Item 3.		Legal Proceedings

We are subject to various product liability claims and lawsuits brought against us for claims involving damages for personal injuries or deaths. Allegedly, these injuries or deaths relate to the use by claimants of products manufactured, designed or reconditioned by us and, in certain cases, products manufactured by others. The ultimate outcome of these claims, or potential future claims, cannot presently be determined. Our management obtains an actuarial analysis and has established an accrual for probable losses based on this analysis which considers, among other factors, our Company’s previous claims history and available information on alleged claims. We maintain primary and excess product liability insurance coverage under various policies. Our primary product liability insurance policy expires in July 2011. We are also party to various non-product liability claims and actions, including without limitation, claims relating to infringement of intellectual property rights of others. We do not believe that any of these claims or actions, either individually or in the aggregate, is material to our business or financial condition.

Item 4.		[Reserved]

PART II

Item 5.		Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

There is no established public trading market for our equity securities.

Item 6.		Selected Financial Data

Set forth below is our selected historical consolidated financial and other operating data. Certain reclassifications of previously reported financial information were made to conform to the current presentation. We follow a 52/53 week fiscal year, which ends on the Saturday closest to December 31. Our selected historical consolidated financial data and other data set forth below as of January 1, 2011, January 2, 2010, January 3, 2009, December 29, 2007 and December 30, 2006 and for the fiscal years ended January 1, 2011, January 2, 2010, January 3, 2009, December 29, 2007 and December 30, 2006, have been derived from our audited consolidated financial statements. The selected historical consolidated financial and other data presented below should be read in conjunction with “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto appearing elsewhere herein.

		Fiscal Year				Fiscal Year				Fiscal Year				Fiscal Year				Fiscal Year
		Ended				Ended				Ended				Ended				Ended
		January 1,				January 2,				January 3,				December 29,				December 30,
		2011				2010				2009				2007				2006(5)
		(Dollars in millions)
Statement of Operations Data:
Net sales		$	772.8			$	716.3			$	775.5			$	724.6			$	639.0
Cost of sales(1)			510.4				482.4				509.1				475.6				426.1
Gross profit			262.4				233.9				266.4				249.0				212.9
Selling, general and administrative expenses			191.3				175.0				179.2				170.0				156.0
Management expenses(2)			—				—				—				—				8.3
Restructuring and other infrequent expenses(3)			—				—				0.5				0.6				0.9
Amortization of intangibles			11.8				13.4				13.4				13.2				12.6
Gain on sale of property, plant and equipment(4)			—				—				—				(2.3	)			—
Income from operations			59.3				45.5				73.3				67.5				35.1
Interest expense, net			44.6				44.9				41.9				41.6				42.4
Income (loss) before taxes			14.7				0.6				31.4				25.9				(7.3	)
Income tax expense (benefit)			6.6				4.7				18.0				11.4				(1.4	)
Net income (loss)		$	8.1			$	(4.1	)		$	13.4			$	14.5			$	(5.9	)
Cash flow data:
Net cash provided by (used in):
Operating activities		$	47.6			$	53.8			$	67.7			$	16.3			$	23.6
Investing activities			(22.5	)			(16.1	)			(17.6	)			(10.1	)			(420.2	)
Financing activities			(35.0	)			(47.4	)			(19.7	)			(0.6	)			403.0
Other Financial Data:
Capital expenditures			20.7				15.7				17.6				16.8				12.8

		As of				As of				As of				As of				As of
		January 1,				January 2,				January 3,				December 29,				December 30,
		2011				2010				2009				2007				2006
		(Dollars in millions)
Balance Sheet Data:
Cash and cash equivalents		$	24.0			$	33.3			$	41.3			$	16.9			$	9.9
Working capital			242.6				211.2				282.9				262.8				225.0
Total assets			964.6				960.6				997.6				956.5				948.1
Total debt			385.2				415.8				455.9				475.6				476.2
Total stockholder’s equity			377.6				363.8				347.0				341.0				318.2

Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected Financial Data,” as well as the consolidated financial statements and notes included elsewhere in this annual report.

Uncertainty of Forward-Looking Statements and Information

This annual report includes forward-looking statements. All statements other than statements of historical fact included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements give our current expectations and projections relating to the financial condition, results of operations, plans, objectives, future performance and business of our Company. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. Many factors mentioned in our discussion in this annual report, including the risks outlined under “Item 1A — Risk Factors,” will be important in determining future results.

These forward-looking statements are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that the events, results or trends identified in these forward-looking statements will occur or be achieved. Investors should not place undue reliance on any of our forward-looking statements because they are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Furthermore, any forward-looking statement speaks only as of the date on which it is made and except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Overview

We are a leading designer, developer and marketer of branded sports equipment, protective products and related accessories. We offer products that are used in baseball, softball, ice hockey, football and other team sports, and in various action sports, including cycling, snowsports, powersports and skateboarding. Sports enthusiasts at all levels, from recreational participants to professional athletes, choose our products for their innovative designs and advanced materials, which provide a performance or protective advantage. Throughout our history, our focus on research and development has enabled us to introduce attractive and innovative products, many of which have set new standards for performance in their respective sports. As a result, we are able to consistently enter new product categories and expand and improve our existing product lines.

We currently sell a broad range of products primarily under four well-known brands—Easton^® (baseball, softball and ice hockey equipment, apparel and cycling components), Bell^® (cycling and action sports helmets and accessories), Giro^® (cycling and snowsports helmets and accessories) and Riddell^® (football equipment and reconditioning services). Together, these brands represent the vast majority of our revenues. We believe that our brands are among the most recognized in the sporting goods industry as demonstrated by our leading market share in many of our core categories.

We sell our products through diverse channels of distribution including: (i) specialty retailers that cater to sports enthusiasts who typically seek premium products at the highest performance levels, (ii) national and regional full-line sporting goods retailers and distributors, (iii) institutional buyers such as educational institutions and athletic leagues and (iv) mass retailers that offer a focused selection of products at entry-level and mid-level price points. As a function of our flexible, low fixed-cost production model, we are able to leverage the expertise of our vendor partners to reduce the overhead and capital intensity generally associated with manufacturing.

We have two reportable segments: Team Sports and Action Sports. Our Team Sports segment primarily consists of football, baseball, softball, ice hockey and other team sports products and reconditioning services related to certain of these products. Our Action Sports segment primarily consists of helmets, equipment, components and accessories for cycling, snowsports and powersports and fitness related products.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our business is performing are net sales growth by segment, gross profit and selling, general and administrative expenses.

Net Sales

Net sales reflect our revenues from the sale of our products and services less returns, discounts and allowances. It also includes licensing income that we collect. Substantially all of Easton’s activity and all of Riddell’s activity is reflected in our Team Sports segment, which primarily consists of football, baseball, softball, ice hockey and other team sports products and reconditioning services related to certain of these products. All of Bell’s activity, including the Bell brand and the Giro brand and the Easton branded cycling products, are reflected in our Action Sports segment, which primarily consists of helmets, equipment, components and accessories for cycling, snowsports and powersports and fitness related products.

Cost of Sales

Cost of sales includes the direct cost of purchased merchandise, inbound freight, factory operating costs (including depreciation), warranty costs, distribution and shipping expenses, including outbound freight. Cost of sales generally changes as we incur higher or lower costs from our vendors, experience better or worse productivity in our factories and increase or decrease inventory levels as certain fixed overhead is included in inventory. A shift in the composition of our net sales can also result in higher or lower cost of sales as our gross profit margins differ by product. We review our inventory levels on an ongoing basis to identify slow-moving materials and products and generally reserve for excess and obsolete inventory. If we misjudge the market for our products, we may be faced with significant excess inventory and need to allow for higher charges for excess and obsolete inventory. Such charges have reduced our gross profit in some prior periods and may have a material adverse impact depending on the amount of the charge.

Gross Profit

Gross profit is equal to our net sales minus our cost of sales. Gross profit margin measures gross profit as a percentage of our net sales. We state inventories at the lower of cost (determined on a first-in, first-out basis) or market and include material, labor and factory overhead costs. Our gross profit may not be fully comparable to other sporting goods companies, as we include costs related to distribution and freight in cost of sales.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses include all operating expenses not included in cost of sales, primarily, selling, marketing, administrative payroll, research and development, product liability, insurance and non-manufacturing lease expense, as well as certain depreciation and amortization. Other than selling expenses, these expenses generally do not vary proportionally with net sales. As a result, SG&A expenses as a percentage of net sales are usually higher in the winter season than the summer season due to the seasonality of net sales.

Results of Operations

Our Company follows a 52/53 week fiscal year, which ends on the Saturday closest to December 31. Fiscal year 2010 was comprised of 52 weeks and ended on January 1, 2011. Fiscal year 2009 was comprised of 52 weeks and ended on January 2, 2010. Fiscal year 2008 was comprised of 53 weeks and ended on January 3, 2009. Also set forth below are the percentage relationships to net sales of certain items included in our consolidated statements of operations.

Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenues if the selling prices of our products do not increase with these increased costs.

						% of Net								% of Net								% of Net
		2010				Sales				2009				Sales				2008				Sales
		(Dollars in millions)
Net sales		$	772.8				100.0	%		$	716.3				100.0	%		$	775.5				100.0	%
Cost of sales			510.4				66.0				482.4				67.3				509.1				65.6
Gross profit			262.4				34.0				233.9				32.7				266.4				34.4
Selling, general and administrative expenses			191.3				24.8				175.0				24.4				179.2				23.1
Amortization of intangibles			11.8				1.5				13.4				1.9				13.4				1.7
Restructuring and other infrequent expenses			—				—				—				—				0.5				0.1
Income from operations			59.3				7.7				45.5				6.4				73.3				9.5
Interest expense, net			44.6				5.8				44.9				6.3				41.9				5.4
Income before income taxes			14.7				1.9				0.6				0.1				31.4				4.1
Income tax expense			6.6				0.9				4.7				0.4				18.0				2.3
Net income (loss)			8.1				1.0				(4.1	)			(0.3	)			13.4				1.8
Other comprehensive income (loss):
Foreign currency translation adjustment			2.3				0.3				5.3				0.7				(11.3	)			(1.5	)
Comprehensive income		$	10.4				1.3	%		$	1.2				0.4	%		$	2.1				0.3	%

2010 compared to 2009

Net income for 2010 was $8.1 million, as compared to a net loss of $(4.1) million for 2009. Our results for 2010 include the following items:

•

provision for excess and obsolete inventory write-offs of $8.4 million;

•

research and development expenses of $13.2 million;

•

product liability settlement and litigation expenses of $5.4 million;

•

provision for allowance for doubtful accounts of $3.4 million;

•

incentive compensation expense of $7.8 million;

•

equity compensation expense of $3.4 million;

•

expenses of $3.7 million related to severing executives and other reorganizing activities;

•

depreciation expense of $17.1 million;

•

licensing fees of $4.0 million;

•

expenses of $1.8 million related to the new lacrosse business;

•

interest expense (net) of $44.6 million; and

•

income tax expense of $6.6 million.

Our results for 2009 included the following items:

•

provision for excess and obsolete inventory write-offs of $6.8 million;

•

research and development expenses of $13.5 million;

•

product liability settlement and litigation expenses of $3.5 million;

•

provision for allowance for doubtful accounts of $3.8 million

•

incentive compensation expense of $1.9 million;

•

equity compensation expense of $5.3 million;

•

expenses of $1.3 million related to severing executives and other reorganizing activities;

•

depreciation expense of $15.1 million;

•

licensing fees of $2.4 million;

•

refinancing fees of $5.4 million;

•

interest expense (net) of $44.9 million; and

•

income tax expense of $4.7 million.

Net Sales

The following table sets forth net sales for each of our segments for the years indicated:

										Change
		2010				2009				$				%
		(Dollars in millions)
Team Sports		$	426.8			$	387.0			$	39.8				10.3	%
Action Sports			346.0				329.3				16.7				5.1	%
		$	772.8			$	716.3			$	56.5				7.9	%

Net sales in both Team Sports and Action Sports were favorably impacted by the improving economic conditions and by favorable foreign currency exchange rate movements. We believe consumers began making more discretionary purchases after delaying them in 2009 and as a result retailers increased their inventory positions.

Net sales in both segments were positively impacted by favorable foreign currency exchange rate movements of $7.2 million and $1.7 million in Team Sports and Action Sports, respectively. On a constant currency basis, net sales in Team Sports and Action Sports were up $32.6 million, or 8.4% and $15.0 million, or 4.6%, respectively. The Team Sports net sales increase resulted primarily from increased sales of football helmets and shoulder pads (resulting from gaining market share and selling into new channels), increased sales of baseball and softball equipment (due to increased bat, bag and protective sales, as new products and designs gained momentum), increased sales of hockey helmets and protective equipment (introduction of Z Shock helmet) and increased sales of collectible football helmets, all of which were partially offset by decreased sales of hockey skates. Performance of reconditioning services also increased during the year primarily due to the acquisition of an equipment reconditioner early in the year. Action Sports net sales increased due to higher sales of cycling accessories, snowsports helmets and goggles and cycling wheels, partially offset by reduced sales of cycling helmets. Sales of fitness-related products were relatively flat for the year.

Cost of Sales

The following table sets forth cost of sales for each of our segments for the years indicated:

						% of								% of
		2010				Net Sales				2009				Net Sales
		(Dollars in millions)
Team Sports		$	268.6				62.9	%		$	246.1				63.6	%
Action Sports			241.8				69.9	%			236.3				71.8	%
		$	510.4				66.0	%		$	482.4				67.3	%

The decrease in Team Sports cost of sales as a percentage of net sales primarily relates to favorable foreign currency exchange rates on sales of hockey products in Canada and Europe, lower sourced product costs benefitting the sale of certain baseball and softball products, and improved mix on sales of football products, all of which were partially offset by unfavorable mix on sales of hockey products, higher licensing fees on sales of certain football products and close out sales on certain hockey products.

The decrease in Action Sports cost of sales as a percentage of net sales primarily relates to favorable mix on sales of cycling helmets and accessories, and snowsports helmets and goggles and favorable foreign currency exchange rates, which were partially offset by unfavorable mix on sales of cycling components and a write down in the value of auto racing inventory.

Gross Profit

The following table sets forth gross profit for each of our segments for the years indicated:

						% of								% of
		2010				Net Sales				2009				Net Sales
		(Dollars in millions)
Team Sports		$	158.2				37.1	%		$	140.9				36.4	%
Action Sports			104.2				30.1	%			93.0				28.2	%
		$	262.4				34.0	%		$	233.9				32.7	%

The increase in Team Sports gross margin primarily relates to favorable foreign currency exchange rates on sales of hockey products in Canada and Europe, lower sourced product costs benefitting the sale of certain baseball and softball products, and improved mix on sales of football products, all of which were partially offset by unfavorable mix on sales of hockey products, higher licensing fees on sales of certain football products and close out sales on certain hockey products.

The increase in Action Sports gross margin primarily relates to favorable mix on sales of cycling helmets and accessories, and snowsports helmets and goggles and favorable foreign currency exchange rates, which were partially offset by unfavorable mix on sales of cycling components and a write down in the value of auto racing inventory.

Selling, General and Administrative Expenses

During 2010, SG&A expenses increased $16.3 million or 9.3%, as compared to 2009. The increase primarily relates to:

•

increased incentive compensation expense of $5.9 million due to the improvement in profitability;

•

an increase in product liability settlement and defense costs of $1.9 million resulting from reserve adjustments and increased litigation costs;

•

increased variable selling expenses of $2.3 million related to the increase in net sales;

•

increased marketing, promotion and sponsorship program spending by $6.1 million;

•

higher depreciation expense of $3.3 million primarily related to capital expenditures for information technology and office expansion/renovation;

•

expenses of $1.8 million related to the new lacrosse business;

•

translation of foreign subsidiary expenses from local currency into United States dollars of $1.8 million;

partially offset by:

•

a decrease in bad debt expense of $0.4 million resulting from improved collections experience and related reserve requirements;

•

mark-to-market adjustment in relation to foreign currency exchange forward contracts of $1.7 million;

•

decreased equity compensation expense of $1.9 million primarily related to a plan modification occurring in 2009.

Amortization of Intangibles

Amortization of intangibles decreased $1.6 million or 12.3% as compared to 2009 due to certain intangible assets becoming fully amortized. Intangibles are composed of finite-lived trademarks and tradenames, customer relationships, patents and licensing and other agreements.

Interest Expense, Net

Net interest expense decreased $0.3 million to $44.6 million for 2010 from $44.9 million in 2009. The decrease was due to a lower average debt balance in 2010, the 2009 write-off of deferred financing fees of $8.8 million and the 2009 payment of $2.9 million of premium/tender fees in relation to redeeming the senior subordinated notes, and a favorable adjustment of $1.1 million to interest expense to reflect the change in the fair value of the interest rate swap during 2010. These reductions to interest expense were partially offset by a higher interest rate on outstanding debt. Changes in the fair value of the interest rate swap, which is not designated as a hedge, are recorded through earnings as part of interest expense throughout the term of the swap.

Income Tax Expense

We recorded an income tax expense of $6.6 million in 2010, an effective tax rate of 44.9%, as compared to an income tax expense of $4.7 million in 2009, an effective tax rate of 847.8%. The difference between the effective rate and the statutory rate for both 2010 and 2009 is primarily attributable to the permanent difference for equity compensation expense, state income taxes, changes to the reserve for uncertain tax positions and the permanent difference for Section 956 of the United States Internal Revenue Code relating to Canada’s investment in United States property.

2009 compared to 2008

Net (loss) for 2009 was $(4.1) million, as compared to net income of $13.4 million for 2008. Our results for 2009 include the following items:

•

provision for excess and obsolete inventory write-offs of $6.8 million;

•

research and development expenses of $13.5 million;

•

product liability settlement and litigation expenses of $3.5 million;

•

provision for allowance for doubtful accounts of $3.8 million;

•

refinancing fees of $5.4 million;

•

equity compensation expense of $5.3 million;

•

expenses of $1.3 million related to severing executives and other reorganizing activities;

•

interest expense (net) of $44.9 million; and

•

income tax expense of $4.7 million.

Our results for 2008 included the following items:

•

provision for excess and obsolete inventory write-offs of $6.0 million;

•

foreign currency transaction loss of $1.2 million;

•

research and development expenses of $13.3 million;

•

product liability settlement and litigation expenses of $7.1 million;

•

provision for allowance for doubtful accounts of $5.5 million;

•

equity compensation expense of $3.9 million;

•

expenses of $1.8 million related to severing executives and other reorganizing activities;

•

restructuring and other expenses of $0.5 million, related to the closure of our Van Nuys, California manufacturing facility;

•

interest expense (net) of $41.9 million; and

•

income tax expense of $18.0 million.

Net Sales

The following table sets forth net sales for each of our segments for the years indicated:

										Change
		2009				2008				$				%
						(Dollars in millions)
Team Sports		$	387.0			$	433.7			$	(46.7	)			(10.8	)%
Action Sports			329.3				341.8				(12.5	)			(3.7	)%
		$	716.3			$	775.5			$	(59.2	)			(7.6	)%

Net sales in both Team Sports and Action Sports were negatively impacted by the overall economic climate and by unfavorable foreign currency exchange rate movements in each segment. Consumers traded down in price points and deferred discretionary purchases and as a result, retailers were reluctant to make advance purchases and closely managed inventory positions.

Net sales in both segments were negatively impacted by unfavorable foreign currency exchange rate movements of $4.9 million and $3.1 million in Team Sports and Action Sports, respectively. On a constant currency basis, net sales in Team Sports and Action Sports were down $41.8 million, or 9.6% and $9.4 million, or 2.8%, respectively. The Team Sports net sales decrease resulted from the decline in sales of baseball and softball equipment, hockey equipment (partially due to the foreign currency exchange rate impact on products sold in Canada and Europe), football equipment (resulting primarily from institutions scaling back purchases due to budget constraints), apparel and collectible football helmets (discretionary purchases). Performance of reconditioning services decreased slightly during the year. Action Sports net sales decreased due to lower sales of cycling helmets and accessories, OEM cycling components and powersports helmets, partially offset by increased sales of snowsports helmets and sales of the recently introduced Giro branded cycling gloves. Sales of fitness-related products were relatively flat for the year.

Cost of Sales

The following table sets forth cost of sales for each of our segments for the years indicated:

						% of								% of
		2009				Net Sales				2008				Net Sales
						(Dollars in millions)
Team Sports		$	246.1				63.6	%		$	263.2				60.7	%
Action Sports			236.3				71.8	%			245.9				71.9	%
		$	482.4				67.3	%		$	509.1				65.6	%

The increase in Team Sports cost of sales as a percentage of net sales primarily relates to unfavorable mix due to a higher concentration of sales of mid and lower price point products, closeout sales of baseball and softball equipment and the negative impact of changes in foreign currency exchange rates on hockey products sold in Canada and Europe, partially offset by lower warranty costs due to reduced defective product returns.

Action Sports cost of sales as a percentage of net sales was down slightly for the year, as the benefit of lower sourced product costs was partially offset by the negative impact of changes in foreign currency exchange rates on net sales and closeout sales of snowsports and powersports helmets.

Gross Profit

The following table sets forth gross profit for each of our segments for the years indicated:

						% of								% of
		2009				Net Sales				2008				Net Sales
						(Dollars in millions)
Team Sports		$	140.9				36.4	%		$	170.5				39.3	%
Action Sports			93.0				28.2	%			95.9				28.1	%
		$	233.9				32.7	%		$	266.4				34.4	%

The decrease in Team Sports gross margin primarily relates to unfavorable mix due to a higher concentration of sales of mid and lower price point products, closeout sales of baseball and softball equipment and the negative impact of changes in foreign currency exchange rates on hockey products sold in Canada and Europe, partially offset by lower warranty costs due to reduced defective product returns.

Action Sports gross margin was up slightly for the year, as the benefit of lower sourced product costs was partially offset by the negative impact of changes in foreign currency exchange rates on net sales and closeout sales of snowsports and powersports helmets.

Selling, General and Administrative Expenses

During 2009, SG&A expenses decreased $4.2 million or 2.3%, as compared to 2008. The decrease primarily relates to:

•

lower incentive compensation expense of $5.2 million due to the decline in profitability;

•

a decrease in product liability settlement and defense costs of $3.6 million from lower settlement and litigation costs;

	•		reduced variable selling expenses of $1.9 million related to the decline in net sales;
	•		controls implemented to reduce marketing and promotion and sponsorship program spending by $1.7 million;

•

a decrease in bad debt expense of $1.7 million resulting from improved collections and related reserve requirements;

•

translation of foreign subsidiary expenses from local currency into United States dollars of $1.4 million;

partially offset by:

•

refinancing fees of $5.4 million;

•

higher depreciation of $2.9 million primarily related to capital expenditures for information technology and office expansion/renovation;

•

mark-to-market adjustment in relation to foreign currency exchange forward contracts of $1.8 million;

•

increased equity compensation expense of $1.4 million primarily related to the modification of the 2006 Equity Incentive Plan, or Incentive Plan; and

•

spending related to the television advertising campaign for the True Fit cycling helmet launch of $1.1 million.

Restructuring and Other Infrequent Expenses

There were no restructuring and other infrequent expenses in 2009, as compared to $0.5 million in 2008. The expense in 2008 related to the closure of a Van Nuys, California manufacturing facility.

Amortization of Intangibles

Amortization of intangibles was $13.4 million for both 2009 and 2008 for finite-lived trademarks and tradenames, customer relationships, patents and licensing and other agreements.

Interest Expense, Net

Net interest expense increased $3.0 million to $44.9 million for 2009 from $41.9 million in 2008. The increase was due in part to the write-off of deferred financing fees of $8.8 million and payment of $2.9 million of premium/tender fees in relation to redeeming the senior subordinated notes, partially offset by reduced debt levels, lower borrowing rates in 2009 and an adjustment of $7.7 million to interest expense to reflect the change in the fair value of the interest rate swap during 2008. Changes in the fair value of the interest rate swap, which is not designated as a hedge, are recorded through earnings as part of interest expense throughout the term of the swap.

Income Tax Expense

We recorded an income tax expense of $4.7 million in 2009, an effective tax rate of 847.8%, as compared to an income tax expense of $18.0 million in 2008, an effective tax rate of 57.4%. The difference between the effective rate and the statutory rate is primarily attributable to the permanent difference for equity compensation expense, state income taxes, changes to the reserve for uncertain tax positions and the permanent difference for Section 956 of the United States Internal Revenue Code of 1986, as amended, or Code, which related to Canada’s investment in United States property. The outstanding balance on intercompany accounts was deemed taxable in the United States under Section 956 of the Code and subject to income tax in both 2009 and 2008.

Quarterly Results

The following table presents unaudited interim operating results. We believe that the following information includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our results of operations for the periods presented. Each quarter is comprised of 13 weeks and in 2010, the quarters ended were April 3, July 3, October 2 and January 1, 2011. The operating results for any period are not necessarily indicative of results for any future period.

		For the Following Quarterly Periods
		First				Second				Third				Fourth
		(Dollars in millions)
		(Unaudited)
2010:
Net sales		$	194.1			$	202.8			$	198.8			$	177.1
Gross profit			64.8				68.9				69.6				59.1
Income from operations			11.7				20.1				18.0				9.5
Net income			0.1				5.0				3.0				—
2009:
Net sales		$	184.9			$	187.3			$	180.4			$	163.7
Gross profit			60.2				60.4				62.0				51.3
Income from operations			9.9				14.8				18.2				2.6
Net income (loss)			1.0				3.9				6.3				(15.3	)

Liquidity and Capital Resources

Our financing requirements are subject to variations due to seasonal changes in working capital levels. Internally generated funds are supplemented when necessary from external sources, primarily from the ABL Facility. The cash generated from operating activities, the issuance of the Notes offered on December 3, 2009, and the availability under the new ABL Facility are our principal sources of liquidity. Each are described below. Based on our current level of operations and anticipated cost savings and operational improvements, we believe our cash flow from operations, available cash and available borrowings under the ABL Facility will be adequate to meet our liquidity needs for at least the next twelve months. We cannot guarantee that the business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule or that future borrowings will be available to us under the ABL Facility in an amount sufficient to enable us to repay our indebtedness, including our senior secured notes, or to fund our other liquidity needs. In addition, upon the occurrence of certain events, such as a change of control of our Company, we could be required to repay or refinance our indebtedness. We cannot assure you that we will be able to refinance any of our indebtedness, including the ABL Facility or our Notes, on commercially reasonable terms or at all.

Our ability to make payments to fund working capital, capital expenditures, debt service, strategic acquisitions, joint ventures and investments will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control. Future indebtedness may impose various restrictions and covenants on us which could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

Our debt to capitalization ratio, which is total debt divided by the sum of total debt and stockholder’s equity, was 50.5% at January 1, 2011, as compared to 53.3% at January 2, 2010. The decrease was primarily attributable to the decrease in debt and the increase in 2010 shareholder’s equity as a result of earnings for the fiscal year ended January 1, 2011.

From time to time, we review and will continue to review acquisition opportunities as well as changes in the capital markets. If we were to consummate a significant acquisition or elect to take advantage of favorable opportunities in the capital markets, we may supplement availability or revise the terms under the ABL Facility or complete public or private offerings of debt securities. If the capital markets present favorable opportunities to purchase our own debt, we may do so.

9.750% Senior Secured Notes

In December 2009, in connection with the refinancing of our then-existing indebtedness, or the Refinancing, we issued $350.0 million of 9.750% senior secured notes due December 2016. Interest is payable on the Notes semi-annually on June 1 and December 1 of each year. We may redeem some or all of the Notes prior to December 1, 2012 at a price equal to 100.00% of the principal amount, plus accrued and unpaid interest and a “make-whole” premium. We may redeem all or any of the Notes on or after December 1, 2012 and prior to December 1, 2013 at 107.313% of the principal amount of the Notes, plus accrued and unpaid interest. We may redeem all or any of the Notes on or after December 1, 2013 and prior to December 1, 2014 at 104.875% of the principal amount of the Notes, plus accrued and unpaid interest. We may redeem all or any of the Notes on or after December 1, 2014 and prior

to December 1, 2015 at 102.438% of the principal amount of the Notes, plus accrued and unpaid interest. At any time on or after December 1, 2015, we may redeem all or any of the Notes at 100.00% of the principal amount of the Notes, plus accrued and unpaid interest. In addition, during any twelve month period commencing on the issue date prior to December 1, 2012, we may redeem up to 10% of aggregate principal amount of the Notes at a price equal to 103.00% of their principal amount, plus accrued and unpaid interest. At any time prior to December 1, 2012, we may also redeem up to 35% of the aggregate principal amount of the Notes at a price equal to 109.750% of the principal amount of the Notes, plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings of our Company. We are not required to make mandatory redemption or sinking fund payments with respect to the Notes. However, the Notes will become due and payable on October 1, 2015 unless on or prior to August 28, 2015, the indebtedness of EB Sports under the New Holdco Facility has been either repaid or refinanced with indebtedness with a stated maturity that is at least 91 days after the maturity date of the Notes.

Among other provisions, the indenture governing the Notes contains certain restrictions that limits our ability to (1) incur, assume or guarantee additional debt, (2) pay dividends and make other restricted payments, (3) create liens, (4) use the proceeds from sales of assets and subsidiary stock, (5) enter into sale and leaseback transactions, (6) enter into agreements that restrict dividends from subsidiaries, (7) change our business, (8) enter into transactions with affiliates, and (9) transfer all or substantially all of our assets or enter into merger or consolidation transactions. The indenture governing the Notes also requires our Company to make an offer to repurchase the Notes at 101.00% of the principal amount following a change of control of our Company, and at 100.00% of the principal amount with the proceeds of certain sales of assets and subsidiary stock.

Subject to certain exceptions, the indenture governing the Notes permits us and our restricted subsidiaries to incur additional indebtedness, including senior indebtedness and secured indebtedness. In addition, the indenture will not limit the amount of indebtedness that our direct or indirect parent entities, including EB Sports and RBG may incur.

ABL Credit Facility

Concurrently with the issuance of the Notes offered in December 2009, we entered into a $250.0 million senior secured asset-based revolving credit facility, subject to availability under each of a United States and Canadian borrowing base, which amount may be increased to allow borrowings of up to $300.0 million, subject to certain conditions, together with certain of our subsidiaries as Canadian Borrowers or Subsidiary Guarantors, with the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, Bank of America, N.A., and Wachovia Capital Finance Corporation (New England), as co-syndication agents, and U.S. Bank National Association, as documentation agent, or the ABL Facility. We used the ABL Facility, together with a portion of the net proceeds of the Notes, to refinance our Previous Credit Agreement. The ABL Facility is to be drawn from time to time for general corporate purposes (including permitted acquisitions) and working capital needs (subject to borrowing base availability).

Certain of our wholly-owned domestic subsidiaries, and all subsidiaries that guarantee the Notes (currently only our wholly-owned domestic subsidiaries) guarantee all of our obligations (both United States and Canadian) under the ABL Facility. In addition, our wholly-owned Canadian subsidiaries guarantee the obligation of the Canadian borrowings under the Canadian sub-facility. Additionally, we and our wholly-owned domestic subsidiaries, subject to certain exceptions, grant security with respect to substantially all of our personal property as collateral for our obligations (and related guarantees) under the ABL Facility, including a first-priority security interest in cash and cash equivalents, lockbox and deposit accounts, accounts receivable, inventory, other personal property relating to such inventory and accounts receivable and all proceeds therefrom and a second-priority security interest in substantially all of our equipment and all assets that secure the notes on a first-priority basis. The obligations of our Canadian subsidiaries that are borrowers under the Canadian sub-facility under the ABL Facility are secured, subject to certain exceptions and permitted liens, on a first-priority lien basis, by substantially all of the assets of our wholly-owned Canadian subsidiaries and by our and our domestic subsidiaries’ assets on the same basis as borrowings by us are secured under the ABL Facility.

The interest rates per annum applicable to the loans under the ABL Facility, other than swingline loans and protective advances, equal an applicable margin percentage plus, at our option, (1) in the case of U.S. dollar denominated loans, a U.S. base rate or LIBOR, and (2) in the case of Canadian dollar denominated loans, a Canadian base rate or CDOR. Swingline loans and protective advances bear interest at the U.S. base rate for U.S. dollar denominated loans and the Canadian base rate for Canadian dollar denominated loans. The applicable margin percentage for the ABL Facility is initially 3.75% for LIBOR or CDOR and 2.75% for the base rate, which is subject to adjustment to 3.25% for LIBOR or CDOR and 2.25% for the base rate based upon our average excess borrowing availability as calculated under the credit agreement for the ABL Facility. In addition to paying interest on outstanding principal under the ABL Facility, we are required to pay a commitment fee, in respect of the unutilized commitments, which is initially 0.75% per annum and may be adjusted to 0.50% based upon our Company’s utilization of the ABL Facility (increasing when utilization is low and decreasing when utilization is high). We are also required to pay customary letter of credit fees.

The ABL Facility requires that if excess gross availability is less than the greater of a specified percentage of the gross borrowing base and a specified dollar amount, we must comply with a minimum fixed charge coverage ratio test. In addition, the ABL Facility includes negative covenants that, subject to significant exceptions, limit our ability and the ability of our parent and subsidiaries to, among other things (1) incur additional debt, (2) create liens, (3) transfer all or substantially all of its assets or enter into merger or consolidation transactions, (4) change its business, (5) make investments, loans, advances, guarantees and acquisitions, (6) transfer or sell assets, (7) enter into sale and leaseback transactions, (8) enter into swap agreements, (9) enter into transactions with affiliates, and (10) enter into agreements that restrict dividends from subsidiaries.

Holdco Facility Obligations

On December 3, 2009, EB Sports refinanced its previous senior unsecured credit agreement with Wachovia Investment Holdings, LLC and the lenders named therein pursuant to which EB Sports had borrowed $175.0 million, or the Previous Holdco Facility, through a new senior secured credit agreement, or the New Holdco Facility, with Wachovia Investment Holdings, LLC and the existing lenders under the Previous Holdco Facility. Pursuant to the refinancing transaction, EB Sports borrowed $108.3 million under the New Holdco Facility. Borrowings under the New Holdco Facility are secured by a pledge of all capital stock of RBG and our Company. The New Holdco Facility is guaranteed by RBG and will, in the future, be guaranteed by any other subsidiary of EB Sports if such other subsidiary of EB Sports guarantees other indebtedness of either EB Sports or RBG.

Borrowings under the New Holdco Facility are not guaranteed by our Company or any of our subsidiaries and are senior unsecured obligations of EB Sports. However, EB Sports depends on us and our subsidiaries, who conduct the operations of the business, for dividends and other payments to generate the funds necessary to meet its financial obligations, including payments of principal and interest on the New Holdco Facility. Given that EB Sports controls our Company’s direct parent, EB Sports has the ability, subject to the terms of our Company’s existing senior secured credit facility and any other agreements which limit our ability to declare and pay dividends, to obtain money from our Company and our subsidiaries in order to fund its obligations under such loan.

As of January 1, 2011, the amount of loans issued under the New Holdco Facility was approximately $122.5 million, including accrued interest.

Sources and Uses of our Cash

Cash provided by operating activities was $47.6 million for 2010, as compared to $53.8 million of cash provided in 2009. The net decrease in cash provided by operating activities as compared to 2009 primarily reflects (i) higher net income, (ii) higher accounts payable, (iii) higher accrued expenses due to increased interest accruals and increased incentive compensation accruals (iv) lower current and noncurrent assets, partially offset by (i) inventory increases in 2010 resulting from purchases made to support sales anticipated or scheduled in the early part of 2011, and (ii) higher accounts receivable due to the increase in net sales in 2010.

Operating activities provided $53.8 million of cash for 2009, as compared to $67.7 million of cash provided in 2008. The net decrease in cash provided by operating activities as compared to 2008 primarily reflects (i) lower net income, (ii) lower accounts payable, (iii) lower accrued expenses due to the payment in 2009 for incentive compensation related to 2008 and the decrease in the accrual for incentive compensation in 2009 and (iv) lower noncurrent liabilities due to a reduction in the notional amount of our interest rate swap contracts related to our Refinancing, partially offset by (i) incremental inventory reductions in 2009, (ii) the receipt of a deposit for insurance in 2009 and (iii) lower accounts receivable due to the decline in net sales in 2009.

Operating activities provided $67.7 million of cash for 2008, as compared to $16.3 million of cash provided in 2007. The increase in the generation of cash primarily relates to the timing impact of increased payables and accrued expenses, which were partially offset by increased accounts receivable and inventory.

The Team Sports business is seasonal and driven primarily by baseball and softball, football and ice hockey buying patterns. Sales of baseball and softball products occur primarily in the late winter and early spring months in preparation for the spring baseball season. Sales of football equipment and reconditioning services are driven primarily by football buying patterns, where orders begin at the end of the school football season (December) and run through to the start of the next season (August). Shipments of football products and performance of reconditioning services reach a low point during the football season. Sales of ice hockey equipment are driven primarily by hockey buying patterns with orders shipping in late spring for fall play.

Working capital typically experiences a buildup in the first half of the year as Team Sports seeks to balance its manufacturing and reconditioning facilities, and therefore, increases inventory. This pattern is magnified by the preference of many school districts to pay for items in the budget year in which they will be used. As July 1st often marks the start of the budget year for these customers, receivable balances generated during the first half of the year are historically reduced as collections are made in the second half of the year.

The Action Sports business is also seasonal and driven primarily by the warm weather months conducive to cycling. As such, Action Sports sales are lowest during the fourth calendar quarter. The seasonal impacts have been partially mitigated by the rise in snowsports sales which are sold primarily during the last two quarters of the year.

Action Sports typically experiences an increase in working capital in the first two fiscal quarters of the year as it builds inventory for the late spring and summer selling seasons for cycling products and ships preseason cycling helmet and accessory orders. Inventories of snowsports products increase in the second and third fiscal quarters in preparation for the upcoming fall-winter selling season. Working capital decreases in the third and fourth fiscal quarters as cycling and snowsports product inventories are reduced through the summer and fall-winter selling seasons, respectively and accounts receivable are collected.

We had $242.6 million in working capital as of January 1, 2011, as compared to $211.2 million at January 2, 2010. The $31.4 million increase in working capital primarily results from higher accounts receivable, inventories and deferred taxes and lower borrowings under the ABL facility, partially offset by decreases in cash, prepaid expenses and other current assets, and increases in accounts payable and accrued expenses. We had $211.2 million in working capital as of January 2, 2010, as compared to $282.9 million at January 3, 2009. The $71.7 million decrease in working capital primarily results from the decrease in cash, lower accounts receivable and inventories and increase in borrowings under the ABL Facility, partially offset by the decrease in the current portion of long-term debt and accounts payable.

Cash used in investing activities was $22.5 million in 2010, as compared to $16.1 million used in 2009. For 2010, the amount was related to capital expenditures for the purchase of property, plant and equipment and the purchase of businesses and in 2009 the amount was for capital expenditures related to the purchase of property, plant and equipment and intellectual property. Capital expenditures for 2010 were $20.7 million, as compared to $15.7 million in 2009. Capital expenditures made in 2010 were primarily related to the enhancement of our ERP system, facilities, and molds and tooling, while capital expenditures in 2009 related primarily to the implementation of our ERP system and enhancing new and existing products. In the second fiscal quarter of 2009 the implementation of the ERP system was substantially completed, which is an enterprise-wide software platform encompassing finance, sales and distribution, manufacturing and materials management. We capitalized interest related to projects of $0.1 million for each of the three fiscal years of 2010, 2009 and 2008.

Cash used in financing activities was $35.0 million in 2010, as compared to $47.4 million used in 2009. In 2010 the net cash used relates primarily to net paydowns on the ABL facility, while in 2009 the net cash used related primarily to refinancing our $335.0 million Previous Credit Agreement ($43.7 million of payments were made prior to the Refinancing and $272.1 million was outstanding at the date of the Refinancing), revolving credit facility ($0.0 million outstanding at date of the Refinancing) and $140.0 million of the Previous Notes and paying $17.5 million of capitalized debt issuance costs through the issuance of $350.0 million of senior secured notes (received $345.7 million of net proceeds) and drawing $85.0 million on the new revolving ABL Facility. We also received a $12.9 million capital contribution from RBG and paid $15.0 million on the new revolving ABL Facility in 2009.

Outlook

Although other factors will likely impact us, including some we do not foresee, we believe our performance for 2011 may be affected by the following:

•

Economic Climate. The uncertain worldwide economic environment could cause the reported financial information not to be necessarily indicative of future operating results or of future financial condition. The current economic environment continues to affect our business in a number of direct and indirect ways including: reduced consumer demand for our products; tighter inventory management by retailers; reduced profit margins due to pricing pressures and an unfavorable sales mix due to a higher concentration of sales of mid to lower price point products; changes in currency exchange rates; lack of credit availability, particularly for specialty retailers; inflation; and business disruptions due to difficulties experienced by suppliers and customers.

•

Retail Market Conditions. As a result of the slowing worldwide economic conditions, the retail market for sports equipment has slowed and is extremely competitive, with strong pressure from retailers for lower prices. We have experienced the effect of consumers trading down price points and delaying certain discretionary purchases, which has resulted in retailers reluctance to place orders for inventory in advance of selling seasons. Further, institutional customers have reduced or deferred purchases due to budget constraints. These trends may continue to have a negative impact on our businesses. We continue to address the retail environment through our focus on innovation and product development and emphasis on multiple price points.

•

Operations and Manufacturing. We intend to continue to streamline distribution, logistics and manufacturing operations, bring uniform methodologies to inventory management, optimize transportation, improve manufacturing efficiencies and provide a high level of service to our customers. Over a several year period we have transitioned production of certain products from our facilities to third party vendors in Asia and other cost efficient sources of labor. However, as a result of our transition of the production of products from our own facilities to third party suppliers, we may become more vulnerable to higher levels of product defects, as well as increased sourced product costs, and our ability to mitigate such cost increases may be reduced.

•

Interest Expense and Debt Repayment. In connection with the Refinancing, we entered into a $250.0 million ABL Facility. As of January 1, 2011, the outstanding principal balance under the ABL Facility was $38.9 million. In addition, we have $350.0 million of outstanding principal amount of our Notes due in December 2016. Because our existing indebtedness requires that we use a substantial portion of our cash flows to service interest payments, the amount of available cash flows we will have for working capital, capital expenditures, acquisitions and other general corporate purposes could be limited.

•

Seasonality. Our business is subject to seasonal fluctuation. Sales of cycling products and accessories occur primarily during the warm weather months. Sales of baseball and softball products occur primarily in the late winter and early spring months in preparation for the spring baseball season. Sales of football equipment and reconditioning services are driven primarily by football buying patterns, where orders begin at the end of the school football season (December) and run through to the start of the next season (August). Shipments of football products and performance of reconditioning services reach a low point during the football season. Sales of ice hockey equipment are driven by ice hockey buying patterns with orders shipping in late spring for fall play. Seasonal impacts are increasingly mitigated by the increase in snowsports and powersports sales which, to a certain extent, counter the cycling, baseball, softball and football seasons.

Contractual Requirements

Future payments required under our significant contractual obligations as of January 1, 2011 are as follows:

						Payments Due by Period
		Total				2011				2012 to 2013				2014 to 2015				2016 and Beyond
		(Dollars in thousands)
Long-term debt(1)		$	388,893			$	38,893			$	—			$	—			$	350,000
Interest payments related to long-term debt(2)			201,906				34,125				68,250				68,250				31,281
Capital lease obligations(3)			120				32				64				24				—
Operating lease obligations			39,704				10,017				13,657				6,580				9,450
Sponsorship/royalty agreements			13,437				5,425				5,750				1,847				415
Total contractual cash obligations		$	644,060			$	88,492			$	87,721			$	76,701			$	391,146

						Amount of Commitment Expiration per Period
		Total				2011				2012 to 2013				2014 to 2015				2016 and Beyond
Standby letters of credit and similar instruments		$	3,306			$	3,306			$	—			$	—			$	—
Total commercial commitments and letters of credit		$	3,306			$	3,306			$	—			$	—			$	—

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. In the preparation of these financial statements, we make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant accounting policies followed in the preparation of the financial statements are detailed in Note 1 in the Notes to Consolidated Financial Statements. We believe that our application of the policies discussed below involve significant levels of judgments, estimates and complexity. These estimates are reviewed from time to time and are subject to change if the circumstances so indicate. The effect of any such change is reflected in results of operations for the period in which the change is made.

Revenue Recognition. Sales of products are recognized when title passes and risks of ownership have been transferred to our customer, which usually is upon shipment. Title generally passes to the dealer or distributor upon shipment from our facilities and the risk of loss upon damage, theft or destruction of the product in transit is the responsibility of the dealer, distributor or third party carrier. Reconditioning revenue is recognized upon the completion of services. Allowances for sales returns, discounts and allowances, including volume-based customer incentives, are estimated and recorded concurrent with the recognition of the sale. Royalty income, which is not material, is recorded when earned based upon contract terms with licensees which provide for royalties.

Accounts Receivable and Allowances. We review the financial condition and creditworthiness of potential customers prior to contracting for sales and record accounts receivable at their face value upon completion of the sale to our customers. We record an allowance for doubtful accounts based upon management’s estimate of the amount of uncollectible receivables. This estimate is based upon prior experience including historic losses as well as current economic conditions. The estimates can be affected by changes in the retail industry, customer credit issues and customer bankruptcies. Since we cannot predict future changes in the retail industry and financial stability of our customers, actual future losses from uncollectible accounts may differ from our estimates. If the financial condition of our customers were to deteriorate, resulting in their inability to make payments, a larger allowance might be required. In the event we determine that a smaller or larger allowance is appropriate, we would record a credit or a charge to selling, general and administrative expense in the period in which such a determination is made. Uncollectible receivables are written-off once management has determined that further collection efforts will not be successful. We generally do not require collateral from our customers.

Inventories. Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market and include material, labor and factory overhead. Provisions for excess and obsolete inventories are based on management’s assessment of slow-moving and obsolete inventory on a product-by-product basis. We record adjustments to our inventory for estimated obsolescence or a decrease in market value equal to the difference between the cost of the inventory and the estimated market value, based on market conditions. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual experience if future economic conditions, levels of consumer demand, customer inventory levels or competitive conditions differ from our expectations.

Long-lived and intangible assets. We follow the current accounting guidance relating to goodwill and trademarks, which have indefinite lives and are not amortized. The carrying values of all long-lived assets, excluding goodwill and indefinite lived intangibles, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or group of assets may not be recoverable (such as a significant decline in sales, earnings or cash flows or material adverse changes in the business climate) in accordance with current accounting guidelines. An impairment loss is recognized when the undiscounted future cash flows estimated to be generated by the asset to be held and used are not sufficient to recover the unamortized balance of the asset. The impairment review includes a comparison of future cash flows expected to be generated by the asset or group of assets with their associated carrying value. If the carrying value of the asset or group of assets exceeds expected cash flows (undiscounted and without interest charges), an impairment loss would be recognized to the extent that the carrying value exceeds the fair value. The estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance. These estimates of undiscounted cash flows may differ from actual cash flows due to, among other things, changes in general economic conditions, customer requirements and our business model.

For goodwill, on an annual basis or more frequently if certain conditions exist, the fair values of our reporting units are compared with their carrying values and an impairment loss is recognized if the carrying value exceeds fair value to the extent that the carrying value of goodwill exceeds its fair value. We generally base our measurement of the fair value of a reporting unit on the present value of future discounted cash flows. The discounted cash flows model indicates the fair value of each reporting unit based on the present value of the cash flows that we expect each reporting unit to generate in the future. Our significant estimates in the discounted cash flows model include our discount rate, long-term rate of growth and profitability of each reporting unit and working capital effects. The growth and profitability rates are based on our expectations for the markets in which we operate and cost increases that are reflective of anticipated inflation (deflation) adjusted for any anticipated future cost savings and our discount rate is based on our weighted average cost of capital. In our most recent impairment analysis, we used a weighted average long-term cash flow growth rate of 6.8%, and a discount rate of 10.0%. Our weighted average long-term growth rate reflects our expectation that our future cash flows will increase. The fair value of the reporting units could change significantly due to changes in estimates of future cash flows as a result of changing economic conditions, our business environment and as a result of changes in the discount rate used.

The Company’s goodwill impairment analysis performed as of January 1, 2011 indicated that none of the reporting units were at risk of failing the goodwill impairment test, and the fair values of each of the reporting units would have to decline at a minimum in excess of 5% depending on the specific reporting unit in order for the carrying value of a particular reporting unit to exceed the fair value. If reductions in estimated undiscounted or discounted cash flows occur in the future, and such reductions indicate that an impairment loss has occurred, an impairment loss will be recorded in the period that such a determination is made.

We amortize certain definite-lived acquired intangible assets on a straight-line basis over estimated useful lives of seven to nineteen years for patents, seven to twenty years for customer relationships, four to five years for licensing and other agreements and seven years for finite-lived trademarks and tradenames. Deferred financing costs are being amortized by the straight-line method over the term of the related debt, which does not vary significantly from an effective interest method.

Income Taxes. We follow the provisions of Accounting Standards Codification (ASC) Topic 740, “Income Taxes”. Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities (excluding non-deductible goodwill) using enacted tax rates in effect for the years in which the differences are expected to become recoverable or payable. A portion of our deferred tax assets relate to net operating loss carryforwards. The realization of these assets is based upon estimates of future taxable income. Changes in economic conditions and the business environment and our assumptions regarding realization of deferred tax assets can have a significant effect on income tax expense.

Product Liability Litigation Matters and Contingencies. We are subject to various product liability claims and/or suits brought against us for claims involving damages for personal injuries or deaths. Allegedly, these injuries or deaths relate to the use by claimants of products manufactured or reconditioned by us or our subsidiaries and, in certain cases, products manufactured by others. The ultimate outcome of these claims, or potential future claims, cannot currently be determined. We estimate the uninsured portion of probable future costs and expenses related to claims, as well as incurred but not reported claims and record an accrual in this amount on our consolidated balance sheets. These accruals are based on managements’ best estimate of probable losses and defense costs anticipated to result from such claims, from within a range of potential outcomes, based on available information, including an analysis provided by an independent actuarial services firm, previous claims history and available information on alleged claims. However, due to the uncertainty involved with estimates, actual results could vary substantially from these estimates.

Derivative Instruments and Hedging Activity. We enter into foreign currency exchange forward contracts to reduce our risk related to inventory purchases. These contracts are not designated as hedges, and therefore, they are recorded at fair value at each balance sheet date, with the resulting change charged or credited to SG&A in the Consolidated Statements of Operations and Comprehensive Income.

Warranty Liability. We record a warranty obligation at the time of sale based on our historical experience. We estimate our warranty obligation by reference to historical product warranty return rates, material usage and service delivery costs incurred in correcting the product. Should actual product warranty return rates, material usage or service delivery costs differ from the historical rates, revisions to the estimated warranty liability would be required.

Stock-Based Compensation. Effective January 1, 2006, we adopted accounting standards which requires us to expense Class B Common Units of our Parent, or Units, granted under our Parent’s Incentive Plan based upon the fair market value of the Units on the date of grant. We are amortizing the fair market value of Units granted over the vesting period of the Units and we are using the prospective method of adoption. For Units issued prior to January 1, 2006, we accounted for these Units using the intrinsic value method in accordance with previous accounting standards.

Recent Accounting Pronouncements

In January 2010, the FASB issued ASU 2010-06 to amend the topic of Improving Disclosures about Fair Value Measurements. As a result of this ASU, our Company is required to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and the related reasoning for the transfer. Also included in the new disclosure requirements is the separate presentation of purchases, sales, issuances and settlements on a gross basis in the reconciliation for significant unobservable inputs, or Level 3 inputs. Further, this ASU clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value for either Level 2 or Level 3 measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll-forward of activity in Level 3 fair value measurements. These Level 3 specific disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of the disclosures required for our Company during the first fiscal quarter of 2010 did not have a material impact on our Company’s financial statement disclosures. Our Company is evaluating the impact of the additional disclosures required for our 2011 filings relating to the Level 3 requirements.

Item 7A.		Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Risk

Our net sales and expenses are predominantly denominated in United States dollars. During the fiscal years ended January 1, 2011, January 2, 2010 and January 3, 2009, approximately 85.2%, 86.8% and 86.1% of our net sales were in United States dollars, respectively, with substantially all of the remaining sales in Canadian dollars, British pounds, Euros and Taiwan dollars. In addition, we purchase a number of materials abroad, including finished goods and raw materials from third parties. A significant amount of these purchases were from vendors in Asia, the majority of which were located in mainland China. We may decide to increase our international sourcing in the future. As a result, we have exposure to currency exchange risks.

Most of what we purchase in Asia are finished goods rather than raw materials. Because we generally purchase these goods in United States dollars, changes in the value of the United States dollar can have a more immediate effect on the cost of our purchases. If we are unable to increase our prices to a level sufficient to cover any increased costs, it could adversely affect our margins.

We enter into foreign currency exchange forward contracts to reduce the risks related to inventory purchases and foreign currency based accounts receivable denominated in foreign currencies. At January 1, 2011, there were foreign currency forward contracts in effect for the purchase of United States $4.5 million aggregated notional amounts, or approximately Cdn $4.5 million. In the future, if we feel our foreign currency exposure has increased, we may consider entering into additional hedging transactions to help mitigate that risk.

Considering both the anticipated cash flows from firm purchase commitments and anticipated purchases for the next quarter and the foreign currency derivative instruments in place at year-end, a hypothetical 10% weakening of the United States dollar relative to other currencies would not have a material adverse effect on our expected first quarter 2011 earnings or cash flows. This analysis is dependent on actual purchases during the next quarter occurring within 90% of budgeted forecasts. In addition, the effect of the hypothetical change in exchange rates ignores the effect this movement may have on other variables, including competitive risk. If it were possible to quantify this competitive impact, the results could well be different than the sensitivity effects analysis described. In addition, it is unlikely currencies would uniformly strengthen or weaken relative to the United States dollar. In reality, some currencies may weaken while others may strengthen. Moreover, any movement of the United States dollar relative to other currencies and its impact on materials costs would likely be partially offset by the impact on net sales due to our sales internationally and the conversion of those international sales into United States dollars.

Interest Rate Risk

We are exposed to market risk from changes in interest rates that can affect our operating results and overall financial condition. In connection with our refinancing in December 2009, we entered into a new $250.0 million ABL Facility. As of January 1, 2011, the outstanding principal balance under this facility was $38.9 million. The interest rates on the ABL Facility are based on (1) the prime rate or LIBOR in the case of U.S. dollar denominated loans and (2) the prime rate or CDOR in the case of Canadian dollar denominated loans, in each case plus an applicable margin percentage. A hypothetical 10% increase from the current interest rate of 6.42% based on the ABL Facility balance of $38.9 million would result in approximately a $0.3 million increase in interest expense for the fiscal year ended January 1, 2011.

Item 8. Financial Statements and Supplementary Data

The following Consolidated Financial Statements of Easton-Bell Sports, Inc. and its subsidiaries for each of the years in the three-year period ended January 1, 2011 are included in this Item:

		Page
Report of Independent Registered Public Accounting Firm			49
Consolidated Balance Sheets as of January 1, 2011 and January 2, 2010			50
Consolidated Statements of Operations and Comprehensive Income for the fiscal years ended January 1, 2011, January 2, 2010 and January 3, 2009			51
Consolidated Statements of Stockholder’s Equity for the fiscal years ended January 1, 2011, January 2, 2010 and January 3, 2009			52
Consolidated Statements of Cash Flows for the fiscal years ended January 1, 2011, January 2, 2010 and January 3, 2009			53
Notes to Consolidated Financial Statements			54

The information under the heading “Quarterly Results” of Item 7 on page 40 of this Form 10-K is incorporated herein by reference.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholder of
Easton-Bell Sports, Inc.

We have audited the accompanying consolidated balance sheets of Easton-Bell Sports, Inc. and subsidiaries as of January 1, 2011 and January 2, 2010, and the related consolidated statements of operations and comprehensive income, stockholder’s equity, and cash flows for each of the three years in the period ended January 1, 2011. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries at January 1, 2011 and January 2, 2010, and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 1, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Ernst & Young LLP

Los Angeles, California
March 8, 2011

EASTON-BELL SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		January 1,				January 2,
		2011				2010
		(Amounts in thousands,
		except share and per
		share amounts)
ASSETS
Current assets:
Cash and cash equivalents		$	24,024			$	33,318
Accounts receivable, net			216,166				208,903
Inventories, net			141,093				127,915
Prepaid expenses			7,080				7,922
Deferred taxes			16,254				12,607
Other current assets			8,483				10,705
Total current assets			413,100				401,370
Property, plant and equipment, net			49,736				46,368
Deferred financing fees, net			14,248				17,255
Intangible assets, net			279,047				290,812
Goodwill			206,928				203,541
Other assets			1,495				1,299
Total assets		$	964,554			$	960,645
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Revolving credit facility		$	38,893			$	70,000
Current portion of capital lease obligations			24				22
Accounts payable			73,148				70,910
Accrued expenses			58,452				49,256
Total current liabilities			170,517				190,188
Long-term debt, less current portion			346,168				345,715
Capital lease obligations, less current portion			78				102
Deferred taxes			49,379				42,104
Other noncurrent liabilities			20,774				18,699
Total liabilities			586,916				596,808
Stockholder’s equity:
Common stock: $0.01 par value, 100 shares authorized, 100 shares issued and outstanding at January 1, 2011 and January 2, 2010			—				—
Additional paid-in capital			360,223				356,788
Retained earnings			15,401				7,275
Accumulated other comprehensive income (loss)			2,014				(226	)
Total stockholder’s equity			377,638				363,837
Total liabilities and stockholder’s equity		$	964,554			$	960,645

See accompanying notes to consolidated financial statements.

EASTON-BELL SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

		Fiscal Year Ended				Fiscal Year Ended				Fiscal Year Ended
		January 1,				January 2,				January 3,
		2011				2010				2009
		(Amounts in thousands)
Net sales		$	772,843			$	716,330			$	775,539
Cost of sales			510,446				482,428				509,127
Gross profit			262,397				233,902				266,412
Selling, general and administrative expenses			191,303				175,038				179,187
Amortization of intangibles			11,765				13,406				13,407
Restructuring and other infrequent expenses			—				—				492
Income from operations			59,329				45,458				73,326
Interest expense, net			44,568				44,910				41,909
Income before income taxes			14,761				548				31,417
Income tax expense			6,635				4,646				18,004
Net income (loss)			8,126				(4,098	)			13,413
Other comprehensive income:
Foreign currency translation adjustment			2,240				5,320				(11,296	)
Comprehensive income		$	10,366			$	1,222			$	2,117

See accompanying notes to consolidated financial statements.

EASTON-BELL SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

						Additional				Retained				Accumulated Other				Total
		Common				Paid-in				Earnings				Comprehensive				Stockholder’s
		Shares				Capital				(Deficit)				Income (Loss)				Equity
		(Amounts in thousands, except share data)
Balance as of December 29, 2007			100			$	337,277			$	(2,040	)		$	5,750			$	340,987
Equity compensation expense			—				3,920				—				—				3,920
Net income in 2008			—				—				13,413				—				13,413
Foreign currency translation adjustment			—				—				—				(11,296	)			(11,296	)
Balance as of January 3, 2009			100				341,197				11,373				(5,546	)			347,024
Equity compensation expense			—				5,327				—				—				5,327
Net loss in 2009			—				—				(4,098	)			—				(4,098	)
Capital contribution by RBG			—				12,858				—				—				12,858
Distribution to RBG			—				(2,594	)			—				—				(2,594	)
Foreign currency translation adjustment			—				—				—				5,320				5,320
Balance as of January 2, 2010			100				356,788				7,275				(226	)			363,837
Equity compensation expense			—				3,435				—				—				3,435
Net income in 2010			—				—				8,126				—				8,126
Foreign currency translation adjustment			—				—				—				2,240				2,240
Balance as of January 1, 2011			100			$	360,223			$	15,401			$	2,014			$	377,638

See accompanying notes to consolidated financial statements.

EASTON-BELL SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Fiscal Year Ended				Fiscal Year Ended				Fiscal Year Ended
		January 1,				January 2,				January 3,
		2011				2010				2009
		(Amounts in thousands)
Cash flows from operating activities:
Net income (loss)		$	8,126			$	(4,098	)		$	13,413
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			28,873				28,530				25,622
Amortization of deferred financing fees and debt discount			3,460				3,530				3,578
Deferred financing fees of old debt written-off			—				8,775				—
Equity compensation expense			3,435				5,327				3,920
Deferred income taxes			3,628				(1,169	)			12,390
Disposal of property, plant and equipment			299				3				12
Changes in operating assets and liabilities, net of effects from purchase of businesses:
Accounts receivable, net			(6,116	)			7,580				(17,583	)
Inventories, net			(11,820	)			21,344				(14,606	)
Other current and noncurrent assets			2,581				1,278				(1,155	)
Accounts payable			2,158				(10,789	)			21,381
Accrued expenses			12,815				(2,002	)			9,351
Other current and noncurrent liabilities			133				(4,515	)			11,372
Net cash provided by operating activities			47,572				53,794				67,695
Cash flows from investing activities:
Purchase of property, plant and equipment			(20,724	)			(15,656	)			(17,618	)
Purchase of intellectual property			—				(400	)			—
Purchase of businesses, net of cash acquired			(1,750	)			—				—
Net cash used in investing activities			(22,474	)			(16,056	)			(17,618	)
Cash flows from financing activities:
Payments on capital lease obligations			(22	)			(21	)			(21	)
Payments on new revolving ABL credit facility			(61,000	)			(15,000	)			—
Proceeds from new revolving ABL credit facility			26,000				85,000				—
Proceeds from old revolving credit facility			—				6,000				53,000
Payments on old revolving credit facility			—				(6,000	)			(58,500	)
Proceeds from issuance of senior secured notes			—				345,677				—
Payments on old senior term notes			—				(315,788	)			(14,187	)
Extinguishment of senior subordinated notes			—				(140,000	)			—
Capital contribution by RBG			—				12,858				—
Distribution to RBG			—				(2,594	)			—
Payment of debt issuance costs			—				(17,505	)			—
Net cash used in financing activities			(35,022	)			(47,373	)			(19,708	)
Effect of exchange rate changes on cash and cash equivalents			630				1,652				(5,991	)
Net change in cash and cash equivalents			(9,294	)			(7,983	)			24,378
Cash and cash equivalents, beginning of year			33,318				41,301				16,923
Cash and cash equivalents, end of year		$	24,024			$	33,318			$	41,301