Riddell Bell Holdings relied on acquisitions to fuel the majority of its fiscal third quarter growth, but also managed to drive strong organic growth in both of its divisions. While reported sales more than doubled during the quarter because of these acquisitions, total pro-forma net sales grew roughly 16%. The company is seeing some gross margin pressures from higher petroleum-based raw material costs, rising steel prices, and to a lesser extent increased labor costs in Asia.
The companys debt level on its $50 million revolving credit facility at the end of the quarter was roughly $7 million but, during a conference call with investors and the media, management indicated that this was entirely paid off in November. Moving into the fourth quarter, RBH is looking at building its cash reserves, which stood at $2.4 million at the end of Q3. The company will also pursue any acquisition opportunities that could fit in its current operating model.
The Team Sports division reported high-single-digit sales increases during the third quarter, primarily due to a shift to higher price-point products and an expansion of the product offering. The company has been aggressively pursuing top-line growth in this division by hiring additional sales personnel. The product line is also much broader than it once was, moving beyond helmets and pads into youth sports, baseball products, and uniforms. Management sees considerable growth opportunity in these new categories.
The Individual Sports division, which includes both the Bell and Giro brands, posted strong double-digit net sales gains, but this was partially due to two small acquisitions and the introduction of Bell motor sports products to mass market distribution. Management indicated that bicycle and snow helmet revenue made a positive contribution to revenue growth and its brands in both of these categories are capturing more market share in the U.S.
|Riddell Bell Holding, Inc.|
|Third Quarter Results|
|(in $ millions)||2005||2004*||Change|
|Gross Margin*||35.9%||41.9%||-120 bps|
|Net Income||$2.4||($2.6)||vs. loss|
* Q3 2004 sales figures for combined company. All other figures are for Team
** at quarter-end