Easton-Bell Sheds Revenues, Boost Margins in First Quarter

 

Gross margin increased by 160 basis points (bps) to 35.4 percent from 33.8 percent, and Adjusted EBITDA exclusive of severance expenses was $24.1 million, an increase of $1.5 million or 6.6 percent from $22.6 million during the first quarter last year. Adjusted EBITDA inclusive of the severance expenses was $19.9 million and decreased by $2.7 million or 11.8 percent for the quarter.

 

Team Sports net sales for the first quarter was flat on a year-over-year basis. Riddell football and Easton baseball/softball continue to gain market share as sales in both businesses reflected low-single digit growth, despite facing difficult comps due to the non-recurring effects that the new policy establishing a ten-year helmet life and the BBCOR bat transition had on each business, respectively. Sales for the quarter also benefited from the introduction of the Easton Mako hockey skate line. These gains were mitigated by the decrease in sales of Easton hockey sticks due to excess retail inventories in the category.

 

 

Action Sports net sales decreased $8.6 million, or 9.4 percent for the quarter. The exit from the fitness products category represented $3.3 million of the decrease and inclement weather had an effect on sales of cycling products, both partially offset by 44 percent growth in sales of powersports helmets from expanded product offerings and geographic distribution, continued market share gains with Giro footwear and the introduction of Giro cycling apparel.

 

 

The 160 bps of gross margin improvement in the quarter reflects the transition of reconditioning operations to Mexico resulting in lower labor costs, increased sales of higher margin bats and powersports helmets and reduced close-out sales.

 

 

Operating expenses increased $7.0 million or 12.3 percent and 450 bps as a percentage of net sales during the quarter due to severance expenses related to management changes, partially offset by lower legal expense. Operating expenses decreased $1.0 million or 1.8 percent and increased 60 bps as a percentage of net sales when excluding such severance expenses.

 

 

Our businesses continue to perform well with growth in Riddell football, Easton baseball/softball and Bell powersports, dampened by the late spring weather related impact on our cycling businesses. The margin expansion is indicative of the strength of our brands and products in the marketplace and our earnings increased when normalized for severance costs related to the recent leadership changes, stated Terry Lee, Executive Chairman and Chief Executive Officer of Easton-Bell.

 

 

Net debt totaled $368.2 million (total debt of $406.4 million less cash of $38.2 million) as of March 30, 2013, a decrease of $14.1 million compared to the net debt amount as of March 31, 2012. Working capital as of March 30, 2013 was $270.5 million (current assets of $473.3 million less current liabilities of $202.8 million) as compared to $271.3 million as of March 31, 2012.

 

 

The company continues to have substantial borrowing capacity and liquidity as of March 30, 2013, with $174.1 million of additional borrowing availability under the revolving credit facility and

EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited and amounts in thousands)
		Fiscal Quarter Ended
		March 30,				March 31,
		2013				2012
Net sales		$	207,612			$	216,281
Cost of sales			134,114				143,106
Gross profit			73,498				73,175
Selling, general and administrative expenses			64,181				57,140
Amortization of intangibles			2,471				2,597
Income from operations			6,846				13,438
Interest expense, net			10,711				10,623
(Loss) income before income taxes			(3,865	)			2,815
Income tax (benefit) expense			(1,802	)			1,465
Net (loss) income			(2,063	)			1,350
Other comprehensive (loss) income:
Foreign currency translation adjustment			(1,523	)			(205	)
Comprehensive (loss) income		$	(3,586	)		$	1,145