Easton-Bell’s Q1 Sales Up 5% on Resurging Team Segment

Easton-Bell Sports Inc. said net sales for the first quarter ended April 3 were $194.1 million an increase of 5.0% as compared to $184.9 million of net sales for the first quarter of fiscal 2009. Operating income was $11.7 million for the first quarter of fiscal 2010, an increase of $1.8 million, or 18.0% as compared to $9.9 million for the first quarter of fiscal 2009.

“Overall our results were in line with expectations as we generated increased top line sales in the quarter while improving our operating margins which resulted in profit growth at a higher rate than sales,” said Paul Harrington, president and CEO. “We are encouraged that our new product introductions were well-received by retailers and consumers as we refine and improve our go to market process across our business segments.”

Team Sports net sales increased $11.6 million or 10.8% in the first quarter of fiscal 2010, as compared to the first quarter of fiscal 2009, or an 8.3% increase on a constant currency basis, due to increased sales of baseball, softball and football equipment as well as gains in apparel.

Action Sports net sales decreased $2.4 million, or 3.1% for the first quarter of fiscal 2010, as compared to the first quarter of fiscal 2009, or a 4.4% decrease on a constant currency basis. The decrease in Action Sports net sales reflects lower helmet and accessory sales in the specialty cycling channel, partially offset by growth in sales of snowsports helmets and strong sales of licensed cycling helmets and accessories and fitness related products in the mass channel.

The company's gross margin for the first quarter of fiscal 2010 was 33.4%, as compared to 32.6% for the first quarter of fiscal 2009. The margin improvement related primarily to increased sales of higher margin products, lower sourced product costs, improved efficiencies in our Mexico operations, lower close-out sales and gains in foreign currency exchange rates, all of which were partially offset by higher royalties on licensed product sales and increased write-offs of specialty inventory.

The company's operating expenses for the first quarter of fiscal 2010 were 25.7% of net sales, as compared to 25.4% of net sales for the first quarter of fiscal 2009. The increase is due primarily to higher depreciation related to increased IT assets and investments in marketing and research and development, which were partially offset by reduced spending on sales support and events.

The company's Adjusted EBITDA was $20.8 million for the first quarter of fiscal 2010, an increase of $2.7 million, or 14.8%, as compared to $18.1 million of Adjusted EBITDA for the first quarter of fiscal 2009.

Balance Sheet Items

Net debt totaled $396.0 million (total debt of $424.9 million less cash of $28.9 million) as of April 3, 2010, an increase of $13.5 million compared to the net debt amount at January 2, 2010 of $382.5 million. The increase in net debt versus last year is due to an increase in debt and capital lease obligations of $9.1 million, and a decrease in cash of $4.4 million. Working capital as of April 3, 2010 was $216.1 million as compared to $211.2 million as of January 2, 2010. Inventories declined $8.6 million, or 6.7% during the quarter while sales increased 5.0%. We ended 2009 with inventories that are of a higher quality which contributed to our margin improvement in the quarter as close-out sales were lower.