Schutt Sports Inc., has filed for Chapter 11
bankruptcy after losing a patent infringement lawsuit brought by rival
Riddell Inc. Schutt Sports also has sued Riddell seeking to block
collection of the $29 million patent suit verdict that a federal court
jury in Madison, Wis., handed down in August.

The company also said in the bankruptcy filing that it is exploring selling some or all of the businesses or raising additional equity. The team equipment manufacturer said it intends to operate its business without interruption during the Chapter 11 cases as it explores certain strategic options to maximize value and recoveries for all stakeholders.

Schutt and affiliates yesterday filed Chapter 11 bankruptcy
papers in Wilmington, Delaware. They listed both assets and debt
of $50 million to $100 million.

A federal court jury in Madison, Wisconsin, found last month that Schutt's DNA and ION football helmets infringed Riddell inventions and awarded Riddell the damages, Riddell said in a statement at the time.

“The debtors are faced with a softer demand for their products due to cutbacks in school budgets and, at the same time, operate under an over-leveraged capital structure,” Rollen Jones, Schutt's chief financial officer, said in court papers.

The company also faces the $29 million verdict “and continued litigation attacks from Riddell,” Jones added

In an exclusive interview, Robert Erb, president and CEO of Schutt, told TEAM Business Magazine, “Our core business, producing team sporting goods equipment, remains successful, as shown by our number one market position in football equipment.  The company will continue normal business operations without interruption to customers.  This bankruptcy filing has occurred to address the company's capital structure and to address the judgment obtained by Riddell.”
“Schutt's management and board of directors determined that a Chapter 11 process would provide the best long-term solution for our customers, suppliers, and employees,” said Erb. “This process will allow us to continue operating our business as usual and to continue servicing our customers without disruption. We have the support of our bank, a great brand and look forward to strengthening our balance sheet and serving our customers for many years to come.”

The company has obtained a Debtor-in-Possession financing facility of $34 million, which will provide sufficient funds to continue normal business operations.

The company is exploring strategic options to maintain long-term health, including selling some or all of the businesses or raising additional equity. The Company has received a proposal for a plan of reorganization funded by a rights offering, backstopped by a group of investors. Riddell, Inc., whose lawsuit was a proximate cause of the need to file chapter 11 would not be given the opportunity to invest in the proposed rights offering.

The proposed plan of reorganization would also provide for a significant deleveraging of the company's balance sheet. The company is considering this proposal, while it also seeks other equity sponsors and acquirers for Schutt. If one of these transactions were to materialize, it would be implemented via a plan or Section 363 auction transaction. The Company has engaged Oppenheimer & Co., Inc., as its investment banker, to explore these options.

The company will continue to pursue vigorously its appeal of the judgment entered against it in favor of Riddell, Inc. during this process.

Schutt Sports is a domestic manufacturer and one of the primary makers of football helmets and faceguards. Three out of four professional football players wear either Schutt gear. Its line include the ION 4D, AiR XP, and DNA line featuring TPU Cushioning. Schutt is also the manufacturer and supplier of bases to Major League Baseball and helmets and protective equipment for the US Olympic Softball Team.

 
Riddell Seeks Second Patent Infringement in Most Recent Lawsuit
 
In related news, following a decision in a Wisconsin court in favor of Riddell, the football equipment giant is again going after Schutt regarding another claim of patent infringement.  In this most recent lawsuit, Riddell claims that Schutt has violated U.S. patent number 7,506,384, awarded to Riddell on March 24, 2009,  entitled 'Shoulder Pad for Contact Sports, or ('the '384 patent').  Schutt was never licensed under said patent, so use of that particular technology is strictly prohibited under federal law. What the court refers to as 'the accused should pads' are none other than the Schutt AiR Flex QB-WR -9405 model.  Riddell, the plaintiff, is claiming that the infringement has caused 'irreparable harm' to the company, for which there is no solution unless the court rules in Riddell's favor.