Easton-Bell Q3 Sales Hurt by Weak Snow Sports Market

“Our product innovation, margin enhancement and investment strategies continued to allow us to gain market share in key product categories and strengthen our financial results, despite the impact of the economy and softness in the global snow market,” said Paul Harrington, president and CEO.

Team Sports net sales increased $7.2 million or 6.2 percent in the third quarter of 2012, as compared to the third quarter of 2011, or 6.4 percent on a constant currency basis. The increase was due to continued market share gains driving double-digit growth in sales of Riddell football products and increased sales of Easton Mako hockey sticks introduced earlier in the year. These gains were partially offset by lower sales of Easton baseball bats as last year benefited from the non-recurring BBCOR bat transition.

Action Sports net sales decreased $6.4 million or 6.7 percent in the third quarter of 2012, as compared to the third quarter of 2011, or 6.5 percent on a constant currency basis. The decrease primarily resulted from the weather-related, double-digit decline in sales of Giro snow products in both the U.S. and Europe, and was partially offset by sales growth in Bell powersports helmets from expanded product offerings and distribution.

The company’s strategic focus on margin enhancement coupled with sales of higher-margin Team Sports products was partially offset by off-price inventory sales and resulted in 10 bps of margin growth for the quarter.

The company’s operating expenses increased $2.1 million or 3.8 percent and 80 bps as a percentage of net sales during the third quarter to support the sales growth and fund product innovation.

Balance sheet items
Easton-Bell ended the quarter with $148.7 million in inventory, up 2.2 percent from the third quarter ended Oct. 1, 2011.

 

Net debt totaled $331.3 million (total debt of $367.1 million less cash of $35.8 million) as of September 29, 2012, a decrease of $27.7 million or 7.7 percent, as compared to net debt of $359.0 million as of October 1, 2011. The decrease in net debt relates to the generation of positive cash flow and pay down on the revolving credit facility. Working capital as of September 29, 2012 was $286.6 million, as compared to $255.8 million as of October 1, 2011 with the increase primarily related to the increase in cash and reduction in the revolving credit facility.

The company had substantial borrowing capability as of September 29, 2012, with $190.2 million of additional borrowing ability under the revolving credit facility and liquidity of $226.0 million when including the $35.8 million of cash.

Easton-Bell Sports, Inc.  markets and licenses products under such well-known brands as Easton, Bell, Giro, Riddell and Blackburn.

 

EASTON-BELL SPORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited and amounts in thousands)
				Fiscal Quarter Ended													Three Fiscal Quarters Ended
				September 29, 2012					October 1, 2011								September 29, 2012					October 1, 2011
Net sales				$	213,329				$	212,467							$	643,677				$	627,778
Cost of sales					137,076					136,808								419,415					417,137
Gross profit					76,253					75,659								224,262					210,641
Selling, general and administrative expenses					56,354					54,294								168,798					156,681
Amortization of intangibles					2,597					2,339								7,791					7,240
Income from operations					17,302					19,026								47,673					46,720
Interest expense, net					11,112					10,635								32,235					32,728
Income before income taxes					6,190					8,391								15,438					13,992
Income tax expense					2,531					3,713								6,721					6,430
Net income					3,659					4,678								8,717					7,562
Other comprehensive income:
Foreign currency translation adjustment					2,593					(4,398	)							1,065					(3,125	)
Comprehensive income				$	6,252				$	280							$	9,782				$	4,437