Easton-Bell Sees Strong Finish to 2005…

Easton-Bell Sports is finally seeing some benefits from its Riddell-Bell integration efforts, just in time to begin the next project – integrating Easton into the business. Since the Easton acquisition occurred after the end of the year, management only reported 2005 Riddell-Bell results. While the company was able to realize sufficient efficiencies between the Riddell and Bell businesses to post healthy net income numbers for the full year, integration is still a priority. The company incurred roughly $300,000 in expenses associated with restructuring the team sports business. The company is now looking towards integrating its financial systems and business systems infrastructure and expects total restructuring expenses to be $2 million to $3 million.

The company realized $3.5 million to $4 million in cost savings during 2005, which was partially offset by raw material price increases in petroleum and iron ore based products. However the cost savings “far exceeded” the raw material price increases.

For the fourth quarter, Easton-Bell Sports’ sales increased 31.2% to $85.9 million compared to $65.5 million in Q4 last year. By segment, team sports reported a 31.6% increase in sales, primarily driven by double-digit growth in helmet, shoulder pad, and cloth product sales categories. Also contributing to the increase in net sales was strong single-digit growth in the reconditioning business. Individual sports saw a 30.4% increase in sales to $60.9 million compared to $46.7 million last year. This increase was primarily due to strong sales of snow products and increased European sales. Snow products increased in the “mid-teens” and European sales increased in the “low 30% range.”

During a conference call with analysts and the media, current company CEO Bill Fry said that the fourth quarter was very positive for the company, with the Riddell-Bell team “hitting on all cylinders.” Essentially every category was up with sales increases in Europe leading the way. The recently acquired Power Sports business also saw double-digit growth while Giro snow helmets and the Riddell institutional business also showed solid gains.

In Snow Sports, Mr. Fry said that they had a very positive year, with orders coming in from across the country into March. The U.S. business was slightly weaker in the Northeast, but he said, “for the most part it was a good snow season.” Additionally, he stated that pre-season orders have been strong and he sees no evidence of excess inventory at retail.

Gross margins for the quarter increased by more than 18 full percentage points to 29.9% compared to 11.2% last year while SG&A expenses fell six full percentage points to 23.9% of sales versus 29.9% during last year’s fourth quarter. These improved metrics brought Easton-Bell’s income from operations back into the black to $1.3 million in the fourth quarter of 2005 compared to a loss of $14.4 million in Q4 last year. Team Sports reported $1.2 million in operating income while Individual Sports reported $9.5 million in operating profits.

The company’s bicycle and action sports helmet business accounted for roughly 54.8% of Easton-Bell’s total sales for the year, or $208.2 million. Snow sports helmet sales were 6.1% of the business, or $23.2 million, while motor sports helmets were the smallest slice of the pie, with $15.6 million, or 4.1% of total sales for the year. Athletic equipment and accessories accounted for approximately 12.0% of sales, or $45.6 million. Reconditioning services accounted for approximately 9.2% or 35.0 million. Collectible products accounted for approximately 5.4% or 20.5 million.