Easton-Bell Sports, Inc. reported net sales increased 7.8% for the third quarter, to $203.4 million from $188.6 million a year ago. Team Sports sales increased $6.7 million, or 6.3%, due to strong growth in ice hockey equipment and modest growth in football equipment. Action Sports net sales increased $8.1 million, or 9.8%, due to increased sales of cycling and snow helmets, cycling accessories and eyewear.
Mass channel sales reflected double digit growth and specialty channel sales were up high single digits in the third fiscal quarter of 2008, as compared to the third fiscal quarter of 2007.
Adjusted EBITDA for the third fiscal quarter of 2008 was $31.2 million, as compared to $29.8 million for the third fiscal quarter of 2007, an increase of 4.7%.
“We are pleased with the company's third quarter results, which reflect the strength of the brands in our portfolio and their category leadership positions. We remain focused on working capital and cash flow management as we work with our strategic partners during these challenging economic times,” said Paul Harrington, Easton Bell Sports, Inc. president and CEO.
The company's net income for the third fiscal quarter of 2008 was $6.3 million, as compared to $6.8 million for the third fiscal quarter of 2007, a decrease of 7.4%. The decrease in net income is due to an increase in selling, general and administrative expenses primarily related to spending on information technology and employee related reorganization costs, along with increased income tax expense. This decrease was partially offset by sales growth and margin improvement.
Net debt totaled $408.1 million (total debt of $497.6 million less cash of $89.5 million) as of Sept. 27, 2008, a decrease of $56.7 million, or 12.2% over such amount at Sept. 29, 2007. The reduction in net debt is due to an increase in cash of $74.2 million and a decrease in long term debt of $2.5 million, partially offset by a $20.0 million increase in revolver loan borrowings. The increase in revolver loan borrowings was taken as a precaution to guarantee liquidity during the recent credit market turmoil. Working capital as of Sept. 27, 2008 was $313.9 million, as compared to $262.8 million as of Dec. 29, 2007. Inventories of $120.0 million at Sept. 27, 2008 were down $15.3 million as compared to inventories of $135.3 million at Dec. 29, 2007.
EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited and amounts in thousands)
Third Fiscal Quarter Ended
September 27, September 29,
Net sales $ 203,369 $ 188,565
Cost of sales 130,505 123,217
Gross profit 72,864 65,348
Selling, general and administrative expenses 46,127 39,375
Restructuring and other infrequent expenses — 488
Amortization of intangibles 3,352 3,352
Gain on sale of property, plant and equipment — (487 )
Income from operations 23,385 22,620
Interest expense, net 9,469 10,165
Income before income taxes 13,916 12,455
Income tax expense 7,573 5,610
Net income 6,343 6,845
Other comprehensive income:
Foreign currency translation adjustment (1,098 ) 2,582
Comprehensive income $ 5,245 $ 9,427