Edgar Filing: RIDDELL SPORTS INC

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTER ENDED MARCH 31, 2001

Commission file number: 0-19298

RIDDELL SPORTS INC.
(Exact name of registrant as specified in its charter)

DELAWARE 22-2890400
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

1450 BROADWAY, SUITE 2001, NEW YORK, NY, 10018
(Address of principal executive offices) (Zip code)

(212) 921-8101
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)

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

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

9,452,250 Common Shares as of May 11, 2001

RIDDELL SPORTS INC.

INDEX

Page
Form 10-Q Cover Page..........................................................1
Form 10-Q Index...............................................................2
Part I. Financial Information:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets........................3
Condensed Consolidated Statements of Operations .............4
Condensed Consolidated Statements of Stockholders' Equity ...5
Condensed Consolidated Statements of Cash Flows .............6
Notes to Condensed Consolidated Financial Statements ........7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..................9
Part II. Other Information:
Item 1. Legal Proceedings................................................12
Item 2. Changes in Securities............................................12
Item 3. Defaults upon Senior Securities..................................12
Item 4. Submission of Matters to a Vote of Security Holders .............12
Item 5. Other Information................................................12
Item 6. Exhibits and Reports on Form 8-K.................................12
Signatures .......................................................13

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This Report contains certain statements which are "forward-looking"
statements under the federal securities laws that are based on the beliefs of
management as well as assumptions made by and information currently available to
management. Forward-looking statements appear in Notes 5, 7 and 9 of Notes to
Condensed Consolidated Financial Statements and throughout Item 2 of Part I,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" concerning Riddell's determination of product liability reserves,
the seasonal patterns of working capital, revenue and operating results in its
business and the estimated cost, prospects and financial impact of its Internet
operations. Certain factors could cause actual results to differ materially from
those in the forward-looking statements including without limitation, (i)
continuation of historical patterns of demand for Riddell's products and
Riddell's ability to meet the demand; (ii) actions by competitors, including
without limitation new product introductions; (iii) the loss of domestic or
foreign suppliers; (iv) changes in business strategy or new product lines and
Riddell's ability to successfully implement these; (v) the outcome of pending
product liability claims and potential future claims; (vi) changes in factors
effecting tax rates for the remainder of 2001; and (vii) changes in interest
rates and general economic conditions. Riddell does not intend to update these
forward-looking statements.

Part 1. FINANCIAL INFORMATION; Item 1. FINANCIAL STATEMENTS

RIDDELL SPORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)

MARCH 31, DECEMBER 31, MARCH 31,
2001 2000 2000
-------- -------- --------

ASSETS
Current assets:
Cash ......................................................... $ 1,457 $ 1,116 $ 1,601
Accounts receivable, trade, less allowance for doubtful
accounts ($994, $1,247 and $1,234 respectively) ............ 35,464 35,245 36,401
Inventories .................................................. 38,370 32,807 39,134
Prepaid expenses ............................................. 7,019 6,419 8,611
Other receivables ............................................ 444 2,070 1,780
Deferred taxes ............................................... 6,770 2,270 2,076
-------- -------- --------
Total current assets ....................................... 89,524 79,927 89,603
Property, plant and equipment, less accumulated
depreciation ($13,139, $12,612 and $10,389 respectively) ..... 8,751 8,543 8,361
Intangibles and deferred charges, less accumulated
amortization ($23,041, $22,011 and $18,920 respectively) ..... 101,358 102,388 104,925
Other assets ................................................... 3,226 2,959 2,880
-------- -------- --------
Total assets ........................................ $202,859 $193,817 $205,769
======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................. $ 10,994 $ 7,340 $ 14,160
Accrued liabilities .......................................... 8,056 10,886 7,897
Customer deposits ............................................ 3,492 5,490 4,493
-------- -------- --------
Total current liabilities .................................. 22,542 23,716 26,550
Long-term debt ................................................. 152,081 138,919 155,721
Deferred taxes ................................................. 2,270 2,270 2,076
Other liabilities .............................................. 3,040 3,040 3,107
Contingent liabilities (Note 5) ................................ -- -- --

Stockholders' equity
Preferred stock .............................................. -- -- --
Common Stock ................................................. 95 95 93
Additional paid in capital ................................... 37,306 37,306 37,031
Accumulated deficit .......................................... (14,475) (11,529) (18,809)
-------- -------- --------
Total stockholders' equity ................................. 22,926 25,872 18,315
-------- -------- --------
Total liabilities and stockholders' equity ........... $202,859 $193,817 $205,769
======== ======== ========

See notes to condensed consolidated financial statements.

RIDDELL SPORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED
MARCH 31,
------------------
2001 2000
------- -------
Net revenues:
Net sales, products and reconditioning ................ $28,641 $28,468
Camps and events ...................................... 11,616 10,555
Royalty income ........................................ 326 257
------- -------
40,583 39,280
------- -------
Cost of revenues:
Products and reconditioning ........................... 17,470 17,077
Camps and events ...................................... 6,867 6,568
------- -------
Cost of sales ......................................... 24,337 23,645
------- -------
Gross profit ............................................. 16,246 15,635
Selling, general and administrative expenses ............. 20,075 18,357
------- -------
(Loss) from operations ................................... (3,829) (2,722)
Interest expense ......................................... 3,617 3,997
------- -------
(Loss) before taxes ...................................... (7,446) (6,719)
Income taxes ............................................. (4,500) --
------- -------
Net (loss) ............................................... ($2,946) ($6,719)
======= =======

Net (loss) per share, basic and diluted .................. ($0.31) ($0.72)

Weighted average number of common and common
equivalent shares outstanding ......................... 9,452 9,296

See notes to condensed consolidated financial statements.

RIDDELL SPORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)

RETAINED
COMMON STOCK ADDITIONAL EARNINGS TOTAL
---------------- PAID IN (ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
------ ------ ------- -------- --------

FOR THE THREE MONTHS ENDED MARCH 31, 2000:

Balance, January 1, 2000 ........ 9,263 $ 93 $36,862 ($12,090) $ 24,865
Stock issued to employees ..... 54 -- 169 -- 169
Net (loss) for the period ..... -- -- -- (6,719) (6,719)
----- ---- ------- -------- --------
Balance, March 31, 2000 ......... 9,317 $ 93 $37,031 ($18,809) $ 18,315
===== ==== ======= ======== ========

FOR THE THREE MONTHS ENDED MARCH 31, 2001:

Balance, January 1, 2001 ........ 9,452 $ 95 $37,306 ($11,529) $ 25,872
Net (loss) for the period ..... -- -- -- (2,946) (2,946)
----- ---- ------- -------- --------
Balance, March 31, 2001 ......... 9,452 $ 95 $37,306 ($14,475) $ 22,926
===== ==== ======= ======== ========

See notes to condensed consolidated financial statements.

RIDDELL SPORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

THREE MONTHS ENDED
MARCH 31,
2001 2000
-------- --------
Cash flows from operating activities:
Net (loss) ........................................... ($ 2,946) ($ 6,719)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization:
Amortization of debt issue costs .................. 216 216
Other depreciation and amortization ............... 1,585 1,477
Provision for losses on accounts receivable ......... 207 162
Deferred taxes ...................................... (4,500) --
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable, trade ................... (426) (4,039)
Inventories .................................. (5,563) (5,746)
Prepaid expenses ............................. (600) (1,033)
Other receivables ............................ 1,626 240
Other assets ................................. (267) (366)
Increase (decrease) in:
Accounts payable ............................. 3,654 3,842
Accrued liabilities .......................... (2,830) (3,717)
Customer deposits ............................ (1,998) (1,597)
-------- --------
Net cash used in operating activities .... (11,842) (17,280)
-------- --------

Cash flows from investing activities:
Capital expenditures ................................ (979) (1,256)
-------- --------
Net cash used in investing activities ..... (979) (1,256)
-------- --------

Cash flows from financing activities:
Net borrowings under line-of-credit agreement ....... 13,162 19,624
-------- --------
Net cash provided by financing activities . 13,162 19,624
-------- --------

Net increase (decrease) in cash ........................ 341 1,088
Cash, beginning ........................................ 1,116 513
-------- --------
Cash, ending ........................................... $ 1,457 $ 1,601
======== ========

See notes to condensed consolidated financial statements.

RIDDELL SPORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of
Riddell Sports Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. These statements
are unaudited, and in the opinion of management include all adjustments
(consisting only of normal recurring adjustments) necessary for fair
presentation of Riddell's consolidated financial position and the consolidated
results of its operations and cash flows at March 31, 2001 and 2000 and for the
periods then ended. Certain information and footnote disclosures made in
Riddell's last Annual Report on Form 10-K have been condensed or omitted for
these interim statements. Accordingly, these condensed consolidated financial
statements should be read in conjunction with Riddell's Annual Report on Form
10-K for the year ended December 31, 2000. Operating results for the three
months ended March 31, 2001 are not necessarily indicative of the results to be
expected during the remainder of 2001.

2. EARNINGS PER SHARE

Net loss per share amounts have been computed by dividing net loss by the
weighted average number of outstanding common shares. Diluted earnings per share
for the three month periods ended March 31, 2001 and 2000 is equal to basic
earnings per share as both periods had a net loss. Potentially dilutive
securities, which include convertible debt and Common Stock options and
warrants, were not dilutive due to the net losses incurred.

3. RECEIVABLES

Accounts receivable include unbilled shipments of approximately $2,927,000,
$972,000 and $2,802,000 at March 31, 2001, December 31, 2000 and March 31, 2000,
respectively. It is Riddell's policy to record revenues when the related goods
have been shipped. Unbilled shipments represent receivables for shipments that
have not been invoiced. These amounts relate principally to partial shipments to
customers who are not invoiced until their order is shipped in its entirety or
customers with orders containing other terms that require a deferral in the
issuance of an invoice. Management believes that substantially all of these
unbilled receivables will be invoiced within the current sales season.

4. INVENTORIES

Inventories consist of the following:
(In thousands) March 31, December 31, March 31,
2001 2000 2000
------- ------- -------
Finished goods $24,543 $18,591 $23,340
Work-in-process 4,199 3,974 3,941
Raw materials 9,628 10,242 11,853
------- ------- -------
$38,370 $32,807 $39,134
======= ======= =======

RIDDELL SPORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. LITIGATION MATTERS AND CONTINGENCIES

At March 31, 2001 Riddell was a defendant in 9 product liability suits
relating to personal injuries allegedly related to the use of helmets
manufactured or reconditioned by subsidiaries of Riddell. The ultimate outcome
of these claims, or potential future claims, cannot presently be determined.
Riddell estimates that the uninsured portion of future costs and expenses
related to these claims, and incurred but not reported claims, will amount to at
least $4,100,000 and, accordingly, a reserve in this amount is included in the
Condensed Consolidated Balance Sheet at March 31, 2001, as part of accrued
liabilities and other liabilities. These reserves are based on estimates of
losses and defense costs anticipated to result from such claims, from within a
range of potential outcomes, based on available information, including an
analysis of historical data such as the rate of occurrence and the settlement
amounts of past cases. However, due to the uncertainty involved with estimates
actual results have at times varied substantially from earlier estimates and
could do so in the future. Accordingly there can be no assurance that the
ultimate costs of such claims will fall within the established reserves.

6. SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest was $6,319,000 and $6,635,000 for the three month
periods ended March 31, 2001 and 2000, respectively. During the three months
ended March 31, 2001, Riddell received an income tax refund of approximately
$1.5 million relating to a carry back of net operating losses of its Varsity
Spirit Corporation subsidiary for periods preceding the 1997 acquisition of
Varsity Spirit Corporation. This tax refund had been recorded as a receivable at
the time of the acquisition. Other income tax payments, or refunds, were not
significant for the three periods ended March 31, 2001 and 2000.

During the three month period ended March 31, 2000, Riddell issued shares
of its common stock, valued at $169,000 based on quoted market values at the
time of grant, to certain employees in satisfaction of an accrual for
compensation included in accrued liabilities at December 31, 1999.

7. INCOME TAXES

Operating results for the first quarter of 2001 reflect a tax benefit based
on the anticipated effective annual tax rate for 2001. The anticipated effective
annual tax rate is estimated based on remaining net operating loss carryforwards
and anticipated income and non-deductible expenses for the year. The actual tax
rate for the year could vary substantially from the anticipated rate due to the
use of these estimates.

RIDDELL SPORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Operating results for the first quarter of 2000 included no income tax
benefit because we had anticipated that net operating loss carryforwards would
be available to offset income taxes for the year ended December 31, 2000.

8. SEGMENT INFORMATION:

Net revenues and income or loss from operations for Riddell's three
reportable segments are as follows:

THREE MONTHS ENDED
MARCH 31,
-----------------------
2001 2000
-------- --------
(In thousands)
Net revenues:
Extracurricular products and services $ 37,474 $ 35,906
Retail products 2,783 3,117
Trademark Licensing 326 257
-------- --------
Consolidated total $ 40,583 $ 39,280
======== ========

Income (loss) from operations:
Extracurricular products and services ($ 2,198) ($ 1,297)
Retail products (428) (223)
Trademark Licensing 168 60
Corporate and unallocated expenses (1,371) (1,262)
-------- --------
Consolidated total ($ 3,829) ($ 2,722)
======== ========

9. SUBSEQUENT EVENT:

In April 2001, we signed an agreement to sell our Riddell Group Division to an
acquisition affiliate of Lincolnshire Management, Inc., a New York based
private-equity fund. Under the terms of the agreement, we would receive cash at
closing equal to $61.0 million plus the approximate amount of short term debt
and interest expense incurred by the Riddell Group Division between January 1,
2001 and closing.

We would use the proceeds from the transaction, net of expenses, to reduce
indebtedness and/or to be reinvested in our business, in accordance with the
terms of our credit facility with Bank of America and our Senior Notes.

RIDDELL SPORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

absence of material adverse change to the business of the Riddell Group
Division. The agreement terminates if the sale is not consummated by June 30,
2001. In addition, under certain limited circumstances, if the agreement is
terminated or the transaction is not consummated, the proposed purchaser will be
entitled to a termination fee of up to $3.5 million. Given the conditions which
must be satisfied prior to consummation of the transaction, there can be no
assurance that the transaction will be completed.

The Riddell Group Division includes: (i) all of our Team Sports business,
except Umbro branded team soccer products, (ii) our licensing segment, which
allows third-parties to market certain products using the Riddell and MacGregor
trademarks to third parties, and (iii) our retail segment, which markets a line
of sports collectibles and athletic equipment to retailers.

For calendar year 2000, Riddell Group Division revenues were $89.3 million,
or approximately 38% of our consolidated revenues of $234.7 million for the
year. The Riddell Group Division's operating income, before interest and taxes,
for calendar 2000 was approximately $10.3 million, or approximately 60% of our
consolidated operating income of $17.0 million for the year. We anticipate that,
if completed, the transaction will result in a loss on disposition, before
income taxes, estimated at approximately $23 million. Additionally, we estimate
that income before taxes for the related operations through June 2001 would
approximate $5 million. Neither the estimated loss on disposition nor the
estimated operating income include an allocation of our interest expense.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Overview and seasonality

Operations for the three-month period ended March 31, 2001 resulted in a
net loss of $2.9 million, or $0.31 per share as compared to a net loss of $6.7
million, or $0.72 per share, for the first quarter of 2000. The reduction in the
first quarter loss was due to the recognition of an income tax benefit for the
first quarter of 2001, while no income tax benefit was recorded in the first
quarter of 2000. The change in income tax benefits between the two periods is
further discussed under "income taxes", below.

Operating results before taxes for the first quarter of 2001 were a loss of
$7.4 million as compared to a loss before taxes of $6.7 million for the first
quarter of 2000. The increase in the first quarter pre-tax loss primarily
resulted from an increase in selling, general and administrative expenses, as
further discussed below.

The loss in the first quarter of 2001 was anticipated and is consistent
with the seasonality of our business. In recent years our operations have been
most profitable in the second and third quarters, with the third quarter
typically the strongest, while losses have been incurred in the first and fourth
quarters. The factors influencing this seasonal pattern were discussed in our
last Annual Report on form 10-K.

Revenues

Revenues in the three-month period ended March 31, 2001 increased 3%, or
$1.3 million, to $40.6 million from $39.3 million in the first quarter of 2000.

The revenue gain came from our extracurricular segment. This segment
markets our team sports and school spirit lines of products and services,
primarily through our direct sales force, to customers such as schools, leagues
and recreational groups. Extracurricular revenues increased 4%, or $1.5 million,
to $37.4 million in the first quarter of 2000 from $35.9 million in the first
quarter of 2000. Volume increases generated most of the gain, with modest price
increases also contributing to revenue growth. School spirit products and
services revenues increased approximately $1.9 million, or 13%, for the quarter.
Sales of team sports products and services decreased 2% or $0.4 million due to a
decrease in sales of Umbro-branded team soccer products. Sales of Umbro products
decreased $0.7 million, or 27%, for the quarter while sales of our Riddell line
of team sports products and services increased $0.3 million, or 1%.

Revenues from the retail segment decreased $0.3 million to $2.7 million in
the first quarter of 2001. The decline was due to a decrease in sales of
recreational and youth team sports products sold to dealers.

Revenues from trademark licensing increased from $0.3 million in he first
quarter of 2000 to $0.4 million in the first quarter of 2001.

Gross profit

Gross profit increased to $16.2 million in the first quarter of 2001 from
$15.6 million in the first quarter of 2000. Gross margin rates were relatively
stable, increasing to 40.0% in 2001 from 39.8% in the first quarter of 2000
principally due to shifts in product mix and offsetting volume related changes.

Gross margins for the extracurricular segment increased to 40.0% in the
first quarter of 2001 from 39.9% in the first quarter of 2000. Gross margins for
the retail segment decreased to 32.4% in the first quarter of 2001 from 33.8% in
the first quarter of 2000, due to the reduction in segment volume for the
quarter.

Selling, general and administrative expenses

Overall, selling, general and administrative expenses increased $1.7
million, or 9%, in the first quarter of 2001. These expenses increased as a
percentage of revenues to 49.5% of revenues in the first quarter of 2001 from
46.7% in the first quarter of 2000.

Most of the increase related to the extracurricular segment which had
higher operating expenses in preparation for the upcoming operating season.
Expenses for the extracurricular segment as a percentage of revenues increased
to 45.9% of revenues in the first quarter of 2000 from 43.5% in the first
quarter of 2000.

For the retail segment, selling, general and administrative expenses in the
three-month period increased $52,000 from the first quarter of the previous year
due to increased marketing expenditures. This increase combined with the sales
decrease for this segment resulted in an increase in selling, general and
administrative expenses as a percentage of revenues to 47.8% in the first
quarter of 2001 from 41.0% in the first quarter of 2000.

Interest expense

Interest expense decreased by $0.4 million to $3.6 million in the first
quarter of 2001 from $4.0 million in the first quarter of 2000. The net expense
for the 2001 period included approximately $250,000 of interest income received
during the quarter as part of a federal income tax refund. The refund, which
included approximately $1.5 million in taxes, related to a carry back of net
operating losses of Riddell's Varsity Spirit Corporation subsidiary for periods
preceding the 1997 acquisition of Varsity Spirit Corporation and had been
recorded as a receivable at the time of the acquisition. Interest expense also
decreased due to lower interest on our revolving line of credit resulting from
lower outstanding indebtedness and decreases in the prime and Libor interest
rates. Outstanding indebtedness decreased in line with working capital demands
which decreased in large part due to improved collections of receivables and
receipt of the tax refund described above.

Income Taxes

operating loss carryforwards and anticipated income and non-deductible expenses
for the year. The actual tax rate for the year could vary substantially from the
anticipated rate due to the use of these estimates.

LIQUIDITY AND CAPITAL RESOURCES

The seasonality of our working capital needs is primarily impacted by three
factors. First, a significant portion of the products we sell in the
extracurricular segment are sold throughout the year on dated-payment terms,
with the related receivables becoming due when the school year begins during the
following July to October period. Second, we incur costs relating to our summer
camp business during first and second quarters as we prepare for the upcoming
camp season in our school spirit division, while camp revenues are mostly
collected in the June to August period. Lastly, our debt structure impacts our
working capital requirements as the semi-annual interest payments on our $115
million, 10.5% Senior Notes come due each January and July.

To finance these seasonal working capital demands, we maintain a credit
facility in the form of a revolving line of credit. The outstanding balance on
the credit facility follows the seasonal cycles described above, increasing
during the early part of the operating cycle in the first and second quarters of
each year and then decreasing from the middle of the third quarter and into the
fourth quarter as collections are used to reduce the outstanding balance.

At March 31, 2001 the outstanding balance under the credit facility was
$29.6 million. This compares with outstanding balances of $16.4 million at
December 31, 2000 and $33.2 million at March 31, 2000. The change in the
outstanding balance between March 31, 2001 and December 31, 2000 reflects the
seasonal working capital pattern presented above, while the decrease in
outstanding borrowing between March 31, 2001 and March 31, 2000 reflects the
factors discussed above in the paragraph on interest expense.

Our current debt service obligations are significant and, accordingly, our
ability to meet our debt service and other obligations will depend on our future
performance and is subject to financial, economic and other factors, some of
which are beyond our control. Furthermore, due to the seasonality of our working
capital demands described above, year-over-year growth in our business and
working capital could lead to higher debt levels in future periods. We believe
that operating cash flow together with funds available from our credit facility
will be sufficient to fund our current debt service, seasonal and other current
working capital requirements.

Agreement to Sell Riddell Group Division

In April 2001, we signed an agreement to sell our Riddell Group Division to
an acquisition affiliate of Lincolnshire Management, Inc., a New York based
private-equity fund. Under the terms of the agreement, we would receive cash at
closing equal to $61.0 million plus the approximate amount of short term debt
and interest expense incurred by the Riddell Group Division between January 1,
2001 and closing.

Closing of the transaction is anticipated to take place in June 2001, but
the consummation of the transactions contemplated by the agreement are subject
to several conditions including, among others, the buyer's obtaining of certain
required consents and agreements with National Football League Properties, Inc.
and the obtaining of consents or agreements from other third parties, the
purchaser securing the necessary financing, the expiration or termination of the
waiting period under the Hart-Scott-Rodino laws and the absence of material
adverse change to the business of the Riddell Group Division. The agreement
terminates if the sale is not consummated by June 30, 2001. In addition, under
certain limited circumstances, if the agreement is terminated or the transaction
is not consummated, the proposed purchaser will be entitled to a termination fee
of up to $3.5 million. Given the conditions which must be satisfied prior to
consummation of the transaction, there can be no assurance that the transaction
will be completed.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Riddell is a defendant in certain product liability proceedings and
from time to time becomes involved in various claims and lawsuits incidental to
its business including, without limitation, employment related litigation. See
Note 5 of "Notes to Condensed Consolidated Financial Statements".

Item 2. Changes in Securities
None

Item 3. Defaults upon Senior Securities
None

Item 4. Submission of Matters to a Vote of Security Holders
None

Item 5. Other Information
None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibit index: None

(b) Reports on Form 8-K

The Company filed a Form 8-K dated April 27, 2001 reporting, under
Item 5. Other Events, that the Company entered into a agreement to sell its
Riddell Group Division and certain additional assets of the Company and its
affiliates for an aggregate purchase price of $61,000,000, plus the
approximate amount of short-term debt incurred by the Riddell Group
Division between January 1, 2001 and closing. The Riddell Group Division
includes: (i) all of the Company's Team Sports business, except Umbro
branded team soccer products, (ii) the Company's licensing segment, which
allows third-parties to market certain products using the Riddell and
MacGregor trademarks to third parties and (iii) the Company's retail
segment, which markets a line of sports collectibles and athletic equipment
to retailers in the United States. The consummation of the transaction
contemplated by the Stock Purchase Agreement is subject to several
conditions including, among others, the purchaser securing the necessary
financing, the obtaining of required consents or agreements from third
parties, Hart Scott Rodino clearance and no material adverse change to the
business of the Riddell Group Division.

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.

RIDDELL SPORTS INC.

Date: May 14, 2001 By /s/ DAVID MAUER
-----------------------------------
David Mauer
President and
Chief Executive Officer

Date: May 14, 2001 By /s/ DAVID GROELINGER
-----------------------------------
David Groelinger
Executive Vice President and
Chief Financial Officer

Date: May 14, 2001 By /s/ LAWRENCE F. SIMON
-----------------------------------
Lawrence F. Simon
Senior Vice President
(Principal Accounting Officer)