Easton-Bell Sports Q3 Revenue Increases 10%

Easton-Bell Sports, parent company of Giro, reported that Q3 revenues climbed ten percent to $198.8 million from $180.4 million during the year ago period, with Action Sports revenues helping boost the overall numbers with an 8% increase. Gross margin was up 35% and team sports sales were boosted 12.4%. Net earnings saw a significant decrease as a result of increased incentive compensation expense.

Giro

Net earnings reached $3.0 million versus $6.3 million a year ago, a 52.4% decline. The bottom line decline also reflects higher interest costs and the impact of foreign currency fluctuations.

“Overall, we are pleased with our top line growth and margin improvement during this important quarter in the sporting goods equipment market,” said Paul Harrington, president and CEO.

Team Sports net sales increased $11.3 million or 12.4% in the third quarter of 2010 due to increased sales of football equipment and reconditioning services, and baseball, softball and ice hockey equipment. Sales of Riddell football equipment and apparel increased approximately 14%.

Action Sports net sales increased $7.1 million or 8.0% due to increased sales of snowsports helmets and goggles, powersports helmets and cycling components, partially offset by lower sales of licensed youth cycling helmets. Sales to key specialty independent bike and snow retailers increased approximately 16% compared to the third quarter of 2009.

The gross margin improvement related primarily to better sales mix in baseball and softball bats, lower manufactured and sourced product costs and favorable foreign currency exchange rates, partially offset by closeout sales of team sports apparel and higher sales of youth football equipment.

The company’s operating expenses increased $8.6 million for the third quarter of 2010 and were 24.6% of net sales. Operating expenses as a percentage of net sales in the third quarter of 2010 were flat to the third quarter of 2009 when normalized for $4.1 million of increased incentive compensation expense. The remaining increase is due primarily to higher variable selling expenses associated with the sales growth and increased marketing expenses for investments in product and brand initiatives.

The company’s Adjusted EBITDA was $27.9 million for the third quarter of 2010. When normalized for increased incentive compensation expense, Adjusted EBITDA increased by $4.2 million or 17.7% compared to the third quarter of 2009.

Balance Sheet Items

Net debt totaled $355.5 million (total debt of $382.1 million less cash of $26.6 million) as of October 2, 2010, a decrease of $27.0 million compared to the net debt amount at January 2, 2010 of $382.5 million. Working capital as of October 2, 2010 was $234.5 million as compared to $211.2 million as of January 2, 2010. Cash decreased $6.8 million or 20.3%, accounts receivable increased $10.6 million or 5.1%, the revolving credit facility decreased $34.1 million or 48.7%, accounts payable decreased by $8.5 million or 12.0% and accrued expenses increased $18.2 million or 36.9%.

The company had substantial borrowing capacity and liquidity as of October 2, 2010, with $149.3 million of additional borrowing availability under the revolving credit facility and liquidity of $175.9 million when including the $26.6 million of cash.

Easton-Bell Sports’s brands include Easton, Bell, Giro, Riddell and Blackburn.




EASTON-BELL SPORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited and amounts in thousands)










Fiscal Quarter Ended

Three Fiscal Quarters Ended



October 2,

2010

October 3,

2009



October 2,

2010

October 3,

2009

Net sales

$ 198,834

$ 180,421

$ 595,695

$ 552,567
Cost of sales

129,245

118,460

392,403

370,025
Gross profit


69,589


61,961


203,292


182,542
Selling, general and administrative expenses


49,015


40,444


144,302


129,609
Amortization of intangibles

2,589

3,352

9,175

10,055
Income from operations


17,985


18,165


49,815


42,878
Interest expense, net

11,132

7,570

33,807

23,623
Income before income taxes


6,853


10,595


16,008


19,255
Income tax expense

3,863

4,306

7,935

8,100
Net income


2,990


6,289


8,073


11,155
Other comprehensive income:











Foreign currency translation adjustment

2,887

1,530

373

3,500
Comprehensive income

$ 5,877

$ 7,819

$ 8,446

$ 14,655
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