On September 6, 2010, Schutt Sports (“Schutt” or the “Debtor”) filed petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  This post will look briefly at the nature of Schutt’s business, why it filed for bankruptcy and what it hopes to achieve while in bankruptcy.  As is often the case, much of the information contained in this post comes from Schutt’s Declaration in Support of First Day Relief (the “Declaration”).  A copy of Schutt’s Declaration is available here for review.

Schutt’s Business

Schutt describes itself as the “leading designer, manufacturer, distributor and marketer of team sporting equipment …”  The Debtor leads the market in the sale of football helmets and face guards.  In addition to football equipment, the company sells softball pitching equipment, baseball bases and sports collectibles.  Decl. at *4.  The end users for Schutt’s products include children, high schools, college and professional sports teams.  Schutt’s sells its product in the U.S., Canada, Germany and Japan.  Decl. at *7.

In 1918, Schutt began manufacturing basketball goals in a hardware store.  By 2009, the company achieved sales of $69 million, employing 360 permanent employees and 160 temporary employees.  Decl. at *7. The company uses a “multi-layered sales network” that includes in-house sales representatives, independent sales representatives and local sales representatives that the company refers to as “Team Dealers.”  Decl. at *8.

Events Leading to Bankruptcy

In addition to manufacturing athletic equipment, Schutt also operates an equipment reconditioning business.  In September of 2005, Schutt expanded its reconditioning business when it acquired Circle System Group, Inc. (“Circle System”).  Behind Riddell, Circle System has the second largest market share in equipment reconditioning.  Decl. at *10.  Schutt purchased Circle System for $23.4 million.

The purchase of Circle System placed substantial debt on Schutt, only to be followed by a global recession that began in the Fall of 2008.  Decl. at *13.  Schutt contends that its “overleveraged balance sheet” is the result of the Circle System acquisition and global recession.  The company’s poor financial condition caused it to breach certain loan covenants with its lenders in June of this year.  Id.

Objectives in Bankruptcy

By filing for bankruptcy, Schutt intends to complete a sale of assets under section 363 of the Bankruptcy Code.  Schutt hopes that the protections afforded under the Bankruptcy Code will allow it to obtain a stronger balance sheet and/or restructure its debt.  Further, the company hopes that the commencement of bankruptcy will provide it with an opportunity to “reconfigure” its products in response to litigation commenced by its largest competitor, Riddell.  Decl. at *18.

This bankruptcy proceeding is before the Honorable Kevin J. Carey, Chief Judge of the United States Bankruptcy Court for the District of Delaware.  Schutt is represented by Greenberg Traurig.