Easton-Bell Sports, Inc. reported sales declined 15.2% in the second quarter ended July 4, to $187.3 million from $220.8 million a year ago. Sales were down 12.6% on a constant currency basis. Net income tumbled to $3.9 million from $15.5 million a year ago.
The company had net sales of $372.1 million for the first half of fiscal 2009, a decrease of 7.6 % as compared to $402.9 million of net sales for the first half of fiscal 2008, or a 4.9% decline on a constant currency basis.
Team Sports net sales decreased $31.5 million, or 23.8% for the second quarter of fiscal 2009, as compared to the second quarter of fiscal 2008. The decrease in Team Sports net sales during the quarter was due to the decline in sales of baseball and softball bats, football equipment and the negative impact that the currency fluctuations had on sales of hockey equipment in Canada and Europe.
Action Sports net sales decreased $2.0 million, or 2.3% for the second quarter of fiscal 2009, as compared to the second quarter of fiscal 2008. The decrease in Action Sports net sales related to lower sales of OEM cycling components and powersports helmets, partially offset by increased sales of snow sports helmets and cycling apparel.
As of July 4, 2009, the company was not in compliance with the leverage ratio test as set forth in its senior secured credit facility. However, the non-compliance was cured on August 14, 2009 as provided for in the credit facility through the exercise of a cure right with a cash equity infusion of $12.9 million by existing investors and members of management. As a result of the equity infusion, the company is currently in compliance with all of its debt covenants.
The company's Adjusted EBITDA, exclusive of the $12.9 million equity cure was $24.0 million for the second quarter of fiscal 2009, a decrease of $16.3 million, or 40.4% as compared to $40.3 million of Adjusted EBITDA in the second quarter of fiscal 2008.
“Our results for the quarter reflect the challenging retail environment, consumers cutting back spending and municipalities selectively reducing purchases. We benefited during the quarter from our ongoing focus on cash management, including lowering inventories, which allowed us to reduce our net debt year over year,” said Paul Harrington, president and chief executive officer. “The planned cash equity infusion by our shareholders is an important endorsement of our long-term growth potential and strength of our brand portfolio.”
Balance Sheet Items
Net debt totaled $402.6 million (total debt of $455.1 million less cash of $52.5 million) as of July 4, 2009, a decrease of $37.7 million over such amount at June 28, 2008. The decrease in net debt versus this time last year is due to an increase in cash of $24.3 million and a decrease in debt and capital lease obligations of $13.3 million. Working capital as of July 4, 2009 was $311.8 million, as compared to $298.3 million as of June 28, 2008.
The company markets and licenses products under such well-known brands as Easton, Bell, Riddell, Giro and Blackburn. The company's products incorporate leading technology and designs and are used by professional athletes and enthusiasts alike. Headquartered in Van Nuys, California, the company has twenty-nine facilities worldwide.
EASTON-BELL SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited and amounts in thousands)
|Fiscal Quarter Ended||Two Fiscal Quarters Ended|
|Cost of sales||126,889||139,398||251,565||260,517|
|Selling, general and administrative expenses||42,270||46,004||89,165||89,639|
|Restructuring and other infrequent expenses||–||317||–||492|
|Amortization of intangibles||3,351||3,352||6,703||6,704|
|Income from operations||14,785||31,739||24,713||45,597|
|Interest expense, net||7,726||2,370||16,053||12,167|
|Income before income taxes||7,059||29,369||8,660||33,430|
|Income tax expense||3,168||13,909||3,794||15,575|
|Other comprehensive income:|
|Foreign currency translation adjustment||2,828||119||1,970||(702||)|