Easton-Bell Sports Sees 8.2% Q4 Revenue Gain

Easton-Bell Sports, Inc. reported net sales of $177.1 million for the fourth quarter, an increase of 8.2% as compared to $163.8 million in the fourth quarter of 2009. Gross margin in the quarter increased to 33.4% from 31.4% and Adjusted EBITDA increased by $2.3 million or 13.8%.

The company's brands include Easton, Bell, Giro, Riddell and Blackburn.

The company's net sales of $772.8 million for fiscal 2010 represented an increase of 7.9% as compared to $716.3 million of net sales for fiscal 2009, or a 6.6% increase on a constant currency basis. During the year, gross margin increased to 34.0% from 32.7% and Adjusted EBITDA increased by $12.9 million or 15.7%.

“Overall we are pleased with both our fourth quarter and results for the year as we were able to deliver top line, margin and EBITDA growth while also investing in our key product launches scheduled for 2011,” said Paul Harrington, president and chief executive officer.

Team Sports net sales increased $8.5 million, or 9.7% for the fourth quarter of fiscal 2010, as compared to the fourth quarter of fiscal 2009 from share gains in the football helmet market, increased sales of baseball and softball bats and the introduction of its new line of hockey sticks. For fiscal 2010, Team Sports net sales increased $39.8 million or 10.3% as compared to fiscal 2009, or an 8.4% increase on a constant currency basis.

Action Sports net sales increased $4.9 million, or 6.4% for the fourth quarter of fiscal 2010, as compared to the fourth quarter of fiscal 2009 primarily due to strong fill-in orders for snow sports helmets and goggles, strong sell-through of cycling helmets and increased sales of Easton cycling wheels to both aftermarket and OEM customers. For fiscal 2010, Action Sports net sales increased $16.7 million, or 5.1% as compared to fiscal 2009, or a 4.6% increase on a constant currency basis.

The 200 bps of margin improvement in the fourth quarter related primarily to better sales mix, partially offset by inventory write-downs related to exiting certain product categories. For fiscal 2010, the 130 bps of margin improvement resulted from the same factors, coupled with strong product launches and improving economic conditions.

The company's operating expenses increased $5.0 million or 12.1% during the fourth quarter of fiscal 2010 as compared to the fourth quarter of 2009 when normalized for $5.3 million of refinancing costs in 2009 and $1.8 million of increased incentive compensation in 2010. The increase in the fourth quarter of 2010 related primarily to higher variable selling expense associated with the sales growth, increased marketing expenses for investments in product and brand initiatives and increased product liability defense and settlement costs.

The company's Adjusted EBITDA was $18.8 million for the fourth quarter of 2010, an increase of $2.3 million or 13.8% compared to the fourth quarter of 2009 when normalized for the $1.8 million of increased incentive compensation expense in 2010.

For fiscal 2010, Adjusted EBITDA was $95.2 million, an increase of $12.9 million, or 15.7% when normalized for the $5.9 million of increased incentive compensation, as compared to Adjusted EBITDA for fiscal 2009.

Balance Sheet Items

Net debt totaled $361.1 million (total debt of $385.1 million less cash of $24.0 million) as of January 1, 2011, a decrease of $21.4 million compared to the net debt amount at January 2, 2010. Working capital as of January 1, 2011 was $242.6 million as compared to $211.2 million as of January 2, 2010. The increase in working capital is related primarily to the increase in accounts receivable and inventory to support the sales growth, reduced borrowings under the revolving credit facility, partially offset by the increase in accrued expenses primarily related to increased incentive compensation expense.

The company had substantial borrowing capacity and liquidity as of January 1, 2011, with $162.9 million of additional borrowing availability under the revolving credit facility and liquidity of $186.9 million when including the $24.0 million of cash.