Easton-Bell Sports, Inc. had net sales of $211.9 million for the second quarter of fiscal 2011, an increase of 4.5 percent as compared to $202.8 million of net sales for the second quarter of fiscal 2010.
Operating income was $16.7 million for the second quarter of fiscal 2011, a decrease of $2.1 million, or 11.2 percent compared to the second quarter of fiscal 2010 when normalized. The decline in operating income is associated with a 50 bps margin decrease due to shifting product introductions into the second half of 2011 and the negative effect of inventory clearance sales.
â€We are pleased to report our sixth consecutive quarter of sales growth despite shifting several key product introductions to the back half of this year,†said Paul Harrington, president and CEO. â€In addition, margins improved throughout the quarter as we replenished our inventory, allowing us to fund marketing investments behind our new products.â€
Team Sports net sales increased $10.3 million or 9.4 percent in the second quarter of fiscal 2011, as compared to the second quarter of fiscal 2010, or 8.7 percent on a constant currency basis. The increase was due to sales growth of football equipment and reconditioning services and a broad based sales increase across baseball and softball categories, including bats. These increases were primarily the result of gains in market share and the success of new products.
Action Sports net sales decreased $1.1 million or 1.2 percent for the second quarter of fiscal 2011, as compared to the second quarter of fiscal 2010, or 2.3 percent on a constant currency basis. The decrease was associated with lower traffic and sell-through of bicycle products in the mass channel, partially offset by increases in cycling and powersports helmets in the specialty channel and the introduction of Giro cycling shoes.
The companyâ€s gross margin for the second quarter of fiscal 2011 was 33.5 percent, as compared to 34.0 percent for the second quarter of fiscal 2010. The margin decline related primarily to shifting product introductions to the back half of the year, sales growth in lower margin youth football equipment and close-out sales of certain inventory items, and was partially offset by increased sales of higher margin cycling helmets in the specialty channel.
The companyâ€s operating expenses increased $5.1 million or 10.9 percent and 140 bps as a percentage of net sales during the second quarter of fiscal 2011, as compared to the second quarter of fiscal 2010 when normalized for a $1.3 million benefit in 2010 related to a mark-to-market adjustment for foreign currency exchange forward contracts. The increase related to variable costs to support the sales growth and planned investments.
The companyâ€s adjusted EBITDA was $25.0 million for the second quarter of fiscal 2011, a decrease of $1.4 million or 5.2 percent as compared to the second quarter of fiscal 2010 when normalized.
Net debt totaled $388.3 million (total debt of $404.5 million less cash of $16.2 million) as of July 2, 2011, an increase of $27.2 million compared to net debt of $361.1 million at the end of fiscal 2010. The increase in net debt relates to financing seasonal working capital requirements. Working capital as of July 2, 2011 was $251.9 million as compared to $242.6 million at the end of fiscal 2010.
The company had substantial borrowing capability as of July 2, 2011, with $162.1 million of additional borrowing ability under the revolving credit facility and liquidity of $178.3 million when including the $16.2 million of cash.
EASTON-BELL SPORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited and amounts in thousands) |
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Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||||||||||
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July 2, |
July 3, |
July 2, |
July 3, |
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Net sales | $ | 211,913 | $ | 202,757 | $ | 415,311 | $ | 396,861 | ||||||||||||||||
Cost of sales | 140,888 | 133,817 | 280,329 | 263,159 | ||||||||||||||||||||
Gross profit | 71,025 | 68,940 | 134,982 | 133,702 | ||||||||||||||||||||
Selling, general and administrative expenses | 52,018 | 45,577 | 102,386 | 95,287 | ||||||||||||||||||||
Amortization of intangibles | 2,348 | 3,251 | 4,901 | 6,586 | ||||||||||||||||||||
Income from operations | 16,659 | 20,112 | 27,695 | 31,829 | ||||||||||||||||||||
Interest expense, net | 11,101 | 11,162 | 22,094 | 22,674 | ||||||||||||||||||||
Income before income taxes | 5,558 | 8,950 | 5,601 | 9,155 | ||||||||||||||||||||
Income tax expense | 2,612 | 3,990 | 2,717 | 4,072 | ||||||||||||||||||||
Net income | 2,946 | 4,960 | 2,884 | 5,083 | ||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Foreign currency translation adjustment | 319 | (3,792 | ) | 1,273 | (2,514 | ) | ||||||||||||||||||
Comprehensive income | $ | 3,265 | $ | 1,168 | $ | 4,157 | $ | 2,569 |