Easton-Bell Sports announces financial results for second quarter 2013

Easton-Bell Sports, Inc. (the "Company"), a leading designer, developer and marketer of branded sports equipment, protective products and related accessories, today announced financial results for the second quarter ended June 29, 2013.

"We are pleased with our progress to date in re-organizing our Company as we prioritize strategies and resources, streamline operations and rationalize spending. To accomplish this, we have incurred substantial one-time costs. Our financial performance when normalized for such costs reflects the strength throughout many of our businesses that is mitigated by the exit of the low-margin non-core fitness products category and challenges in our hockey business," stated Terry Lee, Executive Chairman and Chief Executive Officer of Easton-Bell.

Unless otherwise specified below, references in this press release to Adjusted EBITDA refer to the definition in our senior credit facilities. A detailed reconciliation of such Adjusted EBITDA, which we consider to be the most closely comparable GAAP financial measure, is included in the section entitled "Reconciliation of Non-GAAP Financial Measures," which appears at the end of this press release.

Results for the Second Quarter

The Company had net sales of $201.6 million for the second quarter of 2013, a decrease of 5.8% as compared to $214.1 million of net sales for the second quarter of 2012. The sales decrease is primarily attributable to the exit of the non-core fitness products category and lower hockey sales. Gross margin increased by 70 basis points ("bps") to 35.7% from 35.0%. Adjusted EBITDA exclusive of one-time severance expenses related to management changes and costs related to the exit of the lacrosse product category was $23.5 million, a decrease of $2.2 million or 8.7% from $25.7 million during the second quarter last year. Adjusted EBITDA inclusive of the one-time expenses was $19.5 million and decreased by $6.2 million or 24.3% for the quarter.

Team Sports net sales decreased $11.6 million or 9.4% for the quarter from lower sales of Easton hockey products related to the timing of new stick launches and inflated retail inventories. This decline was dampened by single-digit growth in the football and baseball/softball businesses as Riddell continues to take market share and mitigate last year's difficult comp related to the industry's new ten-year helmet life policy and Easton bats continue to gain share and lead the category.

Action Sports net sales were relatively flat for the quarter. Bell powersports helmet sales increased 49% from market share gains and sales of Bell mass and Giro specialty cycling products benefited from improved weather conditions, offset by the timing of pre-season Giro snow product shipments, lower sales of Easton cycling products and the exit from the non-core fitness products category.

The gross margin improvement in the quarter reflects increased sales of high-margin Easton bats and Bell powersports helmets and cost savings from the transition of reconditioning operations to Mexico, partially mitigated by lower sales of higher-margin hockey sticks and football helmets.

Operating expenses increased $8.4 million or 15.2% and 578 bps as a percentage of net sales during the quarter. The increase was primarily due to the one-time severance expenses and lacrosse exit costs, and non-cash equity compensation expense for new grants. Operating expenses were flat and increased 155 bps as a percentage of net sales when excluding the one-time expenses and non-cash equity compensation expense.

Balance Sheet Items

Net debt totaled $370.4 million (total debt of $402.5 million less cash of $32.1 million) as of June 29, 2013, consistent with the net debt amount as of June 30, 2012. Working capital as of June 29, 2013 was $256.4 million (current assets of $442.5 million less current liabilities of $186.1 million) as compared to $277.0 million as of June 30, 2012.

The Company continues to have substantial borrowing capacity and liquidity as of June 29, 2013, with $158.9 million of additional borrowing availability under the revolving credit facility and liquidity of $191.0 million when including $32.1 million of cash.

Conference Call to Discuss Second Quarter Results

The Company will host a conference call and webcast to discuss its financial results for the second quarter ended June 29, 2013 on a conference call to be held on Tuesday, August 13, 2013, beginning at 2:00 p.m. Eastern Time. The call can be accessed by dialing 1-800-706-7741 (within the United States and Canada) or 1-617-614-3471 (outside the United States and Canada). The pass code for the call is 62880402. The call will also be available via live webcast at: http://www.media-server.com/m/p/wsgazdk2.

A replay of the call will be available on August 14, 2013 through August 20 2013 by dialing 1-888-286-8010 (within the United States and Canada) or 1-617-801-6888 (outside the United States and Canada). The pass code for both replay phone numbers is 74253683.

Source:  Easton-Bell Sports, Inc.