Performance Sports Group Ltd, (PSG) which recently acquired the Easton diamond sport business, reported revenues in the fiscal fourth quarter ended May 31 increased 30 percent to $112.9 million compared to $86.7 million in the same year-ago quarter. On a constant currency basis, revenues were up 35 percent.

The increase was due to strong growth in ice hockey equipment and lacrosse as well as the addition of the Easton and Combat diamond sports businesses acquired from Easton-Bell Sports April 15. Growth was partially offset by an unfavorable impact from foreign exchange. Based in Exeter, NH, PSG also owns the Bauer, Mission, Maverik, Cascade and Inaria, Combat and Easton team sports brands,
 
Excluding the results of the Easton Baseball/Softball and Combat Sports acquisitions, as well as the impact from foreign exchange, revenues grew organically by 15 percent.
 
“Global demand for our platform of brands continues to accelerate,” said Kevin Davis, president and CEO of Performance Sports Group. “Hockey sales remained strong, led by the launch of several new products and apparel, including the Nexus line of sticks, which drove 41 percent growth in the fourth quarter in our largest dollar market share opportunity in hockey. Our hockey team apparel and uniform business also grew an impressive 37 percent in the fourth quarter as we continue to build momentum with this significant growth opportunity. Our lacrosse business also continues to grow at healthy double-digit rates with strong sales of the new Cascade “R” helmet and various new Maverik products.”
 
Adjusted Gross Profit (a non-IFRS measure) in the fourth quarter increased 22 percent to $43.8 million compared to $35.9 million in the year-ago quarter. As a percentage of revenues, adjusted gross profit was 38.8 percent compared to 41.4 percent in the same year-ago period. The decrease in adjusted gross profit margin was primarily driven by an unfavorable impact from foreign exchange and Easton Baseball/Softball's lower gross margin during the six week period since the acquisition date. The company's period of ownership during the fourth quarter is a seasonally low revenue period for the Easton Baseball/Softball business. These factors more than offset improvements in ice hockey gross margin.
 
Selling, general and administrative (SG&A) expenses in the fourth quarter increased 17 percent to $27.4 million compared to $23.4 million in the year-ago quarter, primarily due to the addition of Easton Baseball/Softball as well as higher marketing and acquisition-related costs, partially offset by the gain from the intellectual property litigation settlement with BRG Sports. As a percentage of revenues and excluding acquisition-related charges, costs related to share offerings, share-based payment expenses, and the litigation settlement, SG&A expenses were 24.0 percent compared to 21.8 percent in the year-ago quarter.
 
R&D expenses in the fourth quarter increased 17 percent to $5.3 million compared to $4.6 million in the year-ago quarter, primarily due to continued focus on product development and the addition of Easton and Combat. As a percentage of revenues, R&D expenses decreased to 4.7 percent compared to 5.3 percent in the year-ago quarter.
Adjusted EBITDA increased 52 percent to $21.3 million compared to $14.0 million in the year-ago quarter. The increase was primarily due to higher adjusted gross profitand a favorable realized gain on derivatives, as well as the favorable litigation settlement described above.
 
Adjusted Net Income (a non-IFRS measure) in the fourth quarter increased 12 percent to $10.8 million or $0.29 per diluted share, compared to $9.7 million or $0.26 per diluted share in the year-ago quarter. Adjusted Net Income in the fourth quarter includes the benefit of the aforementioned litigation settlement of $0.09 per diluted share, net of related expenses, and a $0.03 loss related to the acquisition of the Easton Baseball/Softball business. Adjusted EPS of $0.26 in the fourth quarter of Fiscal 2013 included a benefit of $0.05 per diluted share due to non-recurring tax-related items.
 
On May 31, 2014, working capital was $320.9 million compared to $200.9 million on May 31, 2013, primarily due to the acquisition of Easton Baseball/Softball. Excluding the acquisition, working capital was $225.3 million as of May 31, 2014, an increase of 12 percent. Total debt was $523.1 million compared to $171.7 million at May 31, 2013. The company's leverage ratio, defined as average net indebtedness divided by trailing twelve months EBITDA (a non-IFRS measure), stood at 4.78x as of May 31, 2014 compared to 2.70x one year ago. The increase reflects the company's financing of the Easton Baseball/Softball acquisition.
 
On June 25, 2014, the company completed an underwritten public offering for total gross proceeds of approximately $126.5 million. PSG used the net proceeds of the offering to reduce leverage and repay approximately $119.5 million of the company's term loan facility, which was used to finance the Easton Baseball/Softball acquisition. Following the pay down, the company's leverage ratio stood at 3.66x.
 
Full Year Fiscal 2014 Financial Results
Revenues in fiscal 2014 increased 12 percent to $446.2 million compared to $399.6 million in fiscal 2013. On a constant currency basis, revenues were up 14 percent. Excluding the results of the Easton, Combat, INARIA and CASCADE acquisitions, as well as the impact from foreign exchange and the Canadian tariff reduction, revenues grew organically by 6 percent.
 
Adjusted Gross Profit in fiscal 2014 increased 8 percent to $164.7 million compared to $153.0 million in fiscal 2013. As a percentage of revenues, adjusted gross profitwas 36.9 percent compared to 38.3 percent last year.
 
SG&A expenses increased 16 percent to $105.2 million compared to $90.4 million in fiscal 2013. As a percentage of revenues and excluding acquisition-related charges, costs related to share offerings, share-based payment expenses, and the impact of the litigation settlements, SG&A expenses remained flat at 19.8 percent compared to fiscal 2013.
R&D expenses increased 15 percent to $18.5 million compared to $16.1 million in fiscal 2013. As a percentage of revenues, R&D was 4.1 percent compared to 4.0 percent in the prior year.
 
Adjusted EBITDA (a non-IFRS measure) in fiscal 2014 increased 11 percent to $69.0 million compared to $62.3 million in fiscal 2013.
 
Adjusted Net Income (a non-IFRS measure) in fiscal 2014 was $37.3 million or $1.00 per diluted share, compared to $35.7 million or $0.98 per diluted share in fiscal 2013. Adjusted EPS in 2014 includes an $0.08 benefit from the litigation settlement with BRG Sports as well as additional expenses related to litigation matters, and a $0.03 loss related to the acquisition of the Easton Baseball/Softball business. Adjusted EPS in 2013 included a benefit of approximately $0.05 due to non-recurring tax-related items.
 
“Fiscal 2014 was a year of significant transformation for our organization,” said  Davis. “In addition to numerous successful product rollouts and strong growth in our hockey, lacrosse, and apparel businesses, we enhanced our leading performance sports platform with the acquisition of Easton Baseball/Softball. With the acquisition complete, we now hold the No. 1 North American market share in diamond sports and No. 1 worldwide market share in hockey.”
 
“We are meeting or exceeding all of our integration milestones for the Easton operations and I am very happy with the way our entire organization is working to ensure a smooth integration process,” continued Davis. “PSG's expansion into new sports and apparel is a perfect example of our ability to enhance our performance sports platform. As we've proven with our hockey business, we expect to raise the bar of innovation across all of our brands with world class R&D, strong intellectual property and, most importantly, a dedication to connecting with our core consumers. Despite continued currency headwinds, our goal is to deliver another record year of top and bottom-line performance in fiscal 2015.”

PERFORMANCE SPORTS GROUP LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Expressed in thousands of U.S. dollars, except per share amounts)
For the three months ended For the twelve months ended
May 31, May 31,
2014 2013 2014 2013
Revenues $ 112,901 $ 86,740 $ 446,179 $ 399,593
Cost of goods sold 75,111 52,942 291,843 252,419
Gross profit 37,790 33,798 154,336 147,174
Selling, general and administrative expenses 27,401 23,375 105,212 90,435
Research and development expenses 5,313 4,562 18,454 16,056
Income before finance costs, finance income, gain on bargain purchase, other expenses and income tax expense (benefit) 5,076 5,861 30,670 40,683
Finance costs 10,054

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