Easton-Bell Sports, Inc. reported its first loss in six years in 2012 as tough comps and disappointing winter weather in the fourth quarter offset gains made in the prior nine months. Net sales of Easton-, Bell-, Giro- and Riddell-branded products reached $183.5 million in the fourth quarter ended Dec. 31, 2012, down 11.4 percent compared with $207.1 million of net sales for the fourth quarter of 2011.
The company reported a $5.3 million loss from operations compared with $15.9 million in income from operations in the fourth quarter of 2011. Net loss reached $12.2 million compared with net income of $2.5 million a year earlier. Adjusted EBITDA decreased by $17.0 million, or 68.5 percent.
Net sales in the companys Team Sports division decreased $11.5 million, or 9.6 percent for the quarter, as Easton saw the transition to BBCOR-certified bats taper off and Riddells sales were affected by the industrys new 10-year helmet life policy. Easton baseball and softball sales also reflected reduced pre-season orders as mass retailers right-sized their inventories going into the 2013 season.
Action Sports net sales decreased $12.2 million, or 13.9 percent for the quarter due lower sales of Giro ski and snowboard helmets, the timing of cycling product line transitions by mass retailers and the decision to divest the non-core fitness business. Those negatives were partially offset by double-digit sales growth in Giro cycling products and expanded product offerings and global distribution in Bell power sports helmets.
Companywide, gross profits declined 11.3 percent to $183.5 million, or 31.7 percent of revenues, down 350 basis points (bps) from the fourth quarter of 2011. The decline reflected normalized sales levels for the BBCOR bats, the change in football helmet life policy, hockey skate close-outs in preparation for the upcoming Mako launch, reduced sales of Giro snow products and the write-off of Easton cycling inventory due to a design change. Those costs were partially offset by product cost reduction initiatives.
Operating expenses increased $6.5 million or 11.8 percent, up 690 bps as a percentage of net sales due to increased litigation expenses, higher non-cash equity compensation expense and planned investments in product innovation and sales infrastructure. Those expenses were partially offset by reduced incentive compensation and bad debt expense.
For the full year, net sales dipped 1.0 percent to $827.2 million. That included a 1.7 percent decline in Team Sales to $480.3 million and a 4.3 percent decline in Action Sports revenues, which reached $346.9 million. The company reported a net loss of $3.42 million, it first such loss since 2006.
The company ended the year with $141.7 million in inventory, down 2.8 percent compared with Dec. 31, 2011. The company said it had substantial borrowing capacity and liquidity as of Dec. 29, 2012, with $181.1 million of additional borrowing availability under the revolving credit facility and liquidity of $221.9 million when including $40.9 million of cash.
Easton-Bell Sports ended the year with 2,352 employees, including 198 in product design, research and development and testing, 1,481 in operations, 377 in sales and marketing and 296 in administration. Wal-Mart, which accounted for 12.9 percent of Easton-Bells sales in 2012, remains the companys largest single customer.
