SOURCE: Bauer Performance Sports, Ltd.

Bauer Performance Sports, Ltd.

April 09, 2014 19:50 ET

Bauer Performance Sports Reports Record Fiscal Third Quarter 2014 Results

EXETER, NH--(Marketwired - Apr 9, 2014) - Bauer Performance Sports Ltd. (TSX: BAU) ("BPS" or the "Company"), a leading developer and manufacturer of high performance sports equipment and apparel, reported financial results for its fiscal third quarter and nine months ended February 28, 2014. All figures are in U.S. dollars.

The third quarter 2014 financial results are in line with the estimates previously provided in the Company's news release on March 19, 2014, which disclosed preliminary third quarter results in connection with the financing of the Easton Baseball/Softball acquisition.

Fiscal Q3 2014 Financial Highlights vs. Year-Ago Quarter

  • Revenues up 13% to a record $62.2 million (up 16% in constant currency)

  • Ice hockey equipment revenues up 13% (in constant currency, excluding Canadian tariff reduction)

  • Lacrosse revenues up 11%

  • Apparel revenues up 35% (in constant currency) with growth in all categories

  • Adjusted Gross Profit up 21% to $19.8 million, or as a percentage of revenues, up 190 basis points to 31.8%

Back-to-Hockey bookings vs. Year-Ago

  • "Back-to-Hockey" bookings up 18% to $200.2 million (in constant currency) or up 12% to $190.1 million at current FX rates

Management Commentary

"Global demand for all of our BPS brands continued to accelerate, as demonstrated by the strong double digit revenue growth in our third quarter," said Kevin Davis, president and CEO of Bauer Performance Sports. "Driving this record quarter, which is traditionally our weakest seasonally, was strong growth in hockey and lacrosse, as well as the contribution from COMBAT. We attribute these results to the strength of our product development platform, which is supported by authentic brands, deep consumer insight, world-class R&D and strong intellectual property."

"In our hockey business," continued Davis, "sell-through of our products remained strong as the retail marketplace continued to improve. Given this strengthening environment, together with the launch of several innovative new products, we recorded a significant increase in booking orders for our upcoming Back-to-Hockey selling season. We expect these bookings to help drive a strong Back-to-Hockey season despite the significant currency headwinds we face with the approximately 8% weaker Canadian dollar.

"We are excited about our recently announced definitive agreement to acquire the Easton Baseball/Softball business from Easton-Bell Sports. The transaction will immediately add the No. 1 market share brand in baseball/softball to our leading performance sports platform. Like BPS, Easton has a passion for improving the performance and safety of athletes. With this acquisition, we expect to raise the bar of innovation in every category as we've done for hockey and all of our high performance sports in the platform."

Fiscal Q3 2014 Financial Results

Revenues in the fiscal third quarter of 2014 increased 13% to $62.2 million compared to $54.9 million in the same year-ago quarter. On a constant currency basis, revenues were up 16%. The increase was due to strong sales in ice hockey equipment, the addition of COMBAT, growth across all apparel categories and continued growth in sales of lacrosse. Apparel revenues grew 31% in the quarter (35% in constant currency) due to the addition of hockey, lacrosse and soccer uniform sales, as well as a 60% increase in hockey bags, a 36% increase in off-ice team apparel and an 11% increase in lifestyle apparel.

Adjusted Gross Profit (a non-IFRS measure) in the third quarter increased 21% to $19.8 million compared to $16.4 million in the year-ago quarter. As a percentage of revenues, Adjusted Gross Profit increased 190 basis points to 31.8% compared to 29.9% in the same year-ago period. The increase in adjusted gross margin was primarily driven by higher profit margins in ice hockey equipment (see "Non-IFRS Measures" below for further discussion).

Selling, general and administrative ("SG&A") expenses in the third quarter increased 27% to $24.5 million compared to $19.4 million in the year-ago quarter, primarily due to higher acquisition-related costs, the addition of COMBAT and higher marketing costs as a result of the NHL lockout in Fiscal 2013. As a percentage of revenues and excluding acquisition-related charges, costs related to share offerings and share-based payment expense, SG&A expenses were 32.8% compared to 31.3% of revenues in the year-ago quarter.

R&D expenses in the third quarter increased 20% to $4.7 million compared to $4.0 million in the year-ago quarter, primarily due to product development efforts and the addition of COMBAT. As a percentage of revenues, R&D expenses were 7.7% compared to 7.2% of revenues in the year-ago quarter.

Adjusted EBITDA (a non-IFRS measure) improved to a loss of $3.0 million compared to a loss of $3.8 million in the year-ago quarter due to the higher Adjusted Gross Profit and favorable realized gains on derivatives.

Adjusted Net Loss (a non-IFRS measure) in the third quarter was virtually unchanged compared to the prior year at $4.2 million or ($0.11) per adjusted diluted share.

On February 28, 2014, working capital was $179.9 million compared to $160.1 million one year ago, primarily due to the addition of COMBAT as well as higher inventory and accounts receivable due to the growth of the business. Total debt was $130.8 million compared to $140.3 million at February 28, 2013. The Company's leverage ratio, defined as average net indebtedness divided by trailing twelve months EBITDA (a non-IFRS measure), continued to decline and stood at 2.51x as of February 28, 2014 compared to 2.76x one year ago.

Booking orders for the Company's 2014 Back-to-Hockey season (April - September) increased 12% over 2013 to $190.1 million. On a constant currency basis, booking orders were up 18% to $200.2 million. For further detail on the Company's bookings, please refer to the "Booking Orders" section below.

Fiscal Q3 2014 Operational Highlights

  • BPS entered into an agreement with Easton-Bell Sports to acquire the Easton Baseball/Softball business for $330 million in cash, subject to a working capital adjustment and acquisition costs, which, upon closing, would make BPS the No. 1 market leader in both hockey and diamond sports. The acquisition is expected to close within two weeks from the date of this news release.

  • Bauer Hockey unveiled BAUER OD1N, the most revolutionary line of equipment ever introduced to the sport of hockey. Taking two years to develop, the line includes the lightest hockey skate ever created, a fully personalized protective body suit and an ultra-lightweight goal pad constructed with advanced materials never before used in hockey.

  • COMBAT entered into an exclusive three-year agreement with Texas Tech University Softball to be its official supplier of elite softball bats and accessory products.

Nine Month Fiscal 2014 Financial Results

Revenues in the first nine months of fiscal 2014 increased 7% to $333.3 million compared to $312.9 million in the same year-ago period. On a constant currency basis, revenues were up 8%.

Adjusted Gross Profit in the first nine months increased 3% to $120.9 million compared to $117.1 million in the prior year period. As a percentage of revenues, Adjusted Gross Profit was 36.3% compared to 37.4% in the year-ago period.

SG&A expenses increased 16% to $77.8 million compared to $67.1 million in the same period a year ago. As a percentage of revenues, and excluding acquisition-related charges and share-based payment expense, SG&A was 20.3% compared to 19.2% of revenues in the year-ago period.

R&D expenses increased 15% to $13.1 million compared to $11.5 million in the same period a year ago. As a percentage of revenues, R&D was 3.9% compared to 3.7% of revenues in the year-ago period.

Adjusted EBITDA in the first nine months of fiscal 2014 was $47.7 million compared to $48.3 million in the same year-ago period.

Adjusted Net Income in the first nine months was $26.5 million, or $0.71 per diluted share, compared to $26.0 million, or $0.72 per diluted share, in the first nine months of fiscal 2013.

Conference Call

BPS will hold a conference call tomorrow, April 10, 2014 at 10:00 a.m. Eastern time, to discuss its fiscal third quarter 2014 results.

The Company's President and CEO Kevin Davis and CFO Amir Rosenthal will host the conference call, followed by a question and answer period.

Date: Thursday, April 10, 2014
Time: 10:00 a.m. Eastern time (7:00 a.m. Pacific time)
Dial-in number: 1-877-941-1427
International dial-in number: 1-480-629-9664
Conference ID: 4675108

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=108359 and via the investors section of the Company's website at www.bauerperformancesports.com.

A replay of the conference call will be available after 1:00 p.m. Eastern time on the same day through April 24, 2014.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 4675108

About Bauer Performance Sports Ltd.

Bauer Performance Sports Ltd. (TSX: BAU) is a leading developer and manufacturer of ice hockey, roller hockey, lacrosse, baseball and softball equipment, as well as related apparel. The Company has the most recognized and strongest brand in the ice hockey equipment industry, and holds the top market share position in both ice and roller hockey. Its products are marketed under the BAUER, MISSION, MAVERIK, CASCADE, INARIA and COMBAT brand names and are distributed by sales representatives and independent distributors throughout the world. Bauer Performance Sports is focused on building its leadership position and growing market share in all product categories through continued innovation at every level. For more information, please visit www.bauerperformancesports.com.

Booking Orders

The Company's revenues are comprised of booking, repeat and other orders. Although ice hockey booking orders provide the Company some visibility into its future revenues for the season, there may not be a direct relationship between the change in booking orders year-over-year and the anticipated total revenues change for that season, due to several factors including, among others, the potential impact booking orders have on the amount and timing of future repeat orders for which the Company has little visibility and the increased diversification of the Company's product offerings. For a more detailed discussion and definition of the Company's booking and repeat orders, please see the Outlook section of the Company's third quarter MD&A, which is available on SEDAR at www.sedar.com.

Non-IFRS Measures

Adjusted Gross Profit, Adjusted EBITDA, Adjusted EPS and Adjusted Net Income/Loss are non-IFRS measures. Adjusted Gross Profit is defined as gross profit plus the following expenses which are part of cost of goods sold: (i) amortization and depreciation of intangible assets, (ii) non-cash charges to cost of goods sold resulting from fair market value adjustments to inventory as a result of business acquisitions, (iii) reserves established to dispose of obsolete inventory acquired from acquisitions and (iv) other one-time or non-cash items. Adjusted EBITDA is defined as EBITDA (net income adjusted for income tax expense, depreciation and amortization, losses related to amendments to the credit facility, gain or loss on disposal of fixed assets, net interest expense, deferred financing fees, unrealized gains/losses on derivative instruments, and realized and unrealized gains/losses related to foreign exchange revaluation) before restructuring and other one-time or non-cash charges associated with acquisitions, other one-time or non-cash items, pre-initial public offering sponsor fees, costs related to share offerings, as well as share-based payment expenses. Adjusted EPS is defined as Adjusted Net Income/Loss divided by the weighted average diluted shares outstanding. Adjusted Net Income/Loss is defined as net income adjusted for all unrealized gains/losses related to derivative instruments and unrealized gains/losses related to foreign exchange revaluation, non-cash or incremental charges associated with acquisitions, amortization of acquisition-related intangible assets for acquisitions since the Company's initial public offering, costs related to share offerings, share-based compensation expense and other non-cash or one-time items.

Reconciliations of these non-IFRS measures to the relevant reported results can be found in the tables at the end of this press release and in the Company's MD&A for the third quarter.

All references to "constant currency" reflect the impact of translating the current period results at the monthly foreign exchange rates from the prior year period. This translation impact does not include the impact of foreign exchange on the Company's direct material costs or gains/losses on derivatives. For more information, see Factors Affecting our Performance - Impact of Foreign Exchange in the Company's MD&A.

Caution Regarding Forward-Looking Statements

This press release includes forward-looking statements within the meaning of applicable securities laws, including with respect to booking orders driving strong fourth quarter results for the Company's hockey business, further innovation in baseball and softball following the completion of the acquisition of the Easton baseball/softball business, the Company's pending acquisition of the Easton baseball/softball business and the financing thereof. Forward-looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements.

Forward-looking statements, by their nature, are based on assumptions, including those described herein and are subject to important risks and uncertainties. Many factors could cause the Company's actual results to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors: failure by the Company to complete the acquisition of the Easton baseball/softball business (including financing thereof) or to realize the anticipated strategic benefits or operational or cost synergies, expectations regarding a counter seasonal revenue stream to the Company's existing revenue stream and the successful expansion of the market share of the Easton baseball/softball business, inability to introduce new and innovative products, intense competition in the equipment and apparel industries, inability to introduce technical innovation, inability to protect worldwide intellectual property rights and related litigation, inability to successfully integrate acquisitions, decrease in ice hockey, roller hockey, lacrosse and/or baseball/softball participation rates, adverse publicity, reduction in popularity of the NHL, NLL, MLB and other professional leagues in which our products are used, changes in consumer preferences and the difficulty in anticipating or forecasting those changes, inability to maintain and enhance brands, reliance on third party suppliers and manufacturers, disruption of distribution chain or loss of significant customers or suppliers, cost of raw materials and shipping freight and other cost pressures, a change in the mix or timing of orders placed by customers, inability to forecast demand for products, inventory shrinkage or excess inventory, product liability claims and lawsuits, product recalls, compliance with standards of testing and athletic governing bodies, departure of senior executives or other key personnel, litigation and related matters, employment or union related matters, fluctuations in the value of certain foreign currencies in relation to the US dollar, inability to manage foreign exchange derivative instruments, general economic and market conditions, natural disasters, as well as the factors identified in the "Risk Factors" section of the Company's MD&A for the third quarter and the Annual Information Form dated August 27, 2013, both of which are available on SEDAR at www.sedar.com.

Furthermore, unless otherwise stated, the forward-looking statements contained in this press release are made as of the date of this press release, and we have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

   
   
BAUER PERFORMANCE SPORTS LTD.  
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION (UNAUDITED)  
(Expressed in thousands of U.S. dollars)  
             
    As of     As of  
    February 28,     May 31,  
    2014     2013  
ASSETS                
Current assets:                
  Cash   $ 7,700     $ 4,467  
  Trade and other receivables     109,896       113,682  
  Inventories     95,650       109,747  
  Income taxes recoverable     2,345       1,966  
  Foreign currency forward contracts     6,439       4,513  
  Prepaid expenses and other assets     4,483       3,084  
Total current assets     226,513       237,459  
                 
Property, plant and equipment     9,310       10,509  
Goodwill and intangible assets     146,891       152,644  
Foreign currency forward contracts     143       1,119  
Other non-current assets     3,048       721  
Deferred income taxes     5,902       4,985  
TOTAL ASSETS   $ 391,807     $ 407,437  
                 
LIABILITIES                
Current liabilities:                
  Debt   $ 7,866     $ 10,774  
  Trade and other payables     25,658       22,548  
  Accrued liabilities     27,095       25,672  
  Provisions     2,944       2,041  
  Income taxes payable     3,593       989  
  Retirement benefit obligations     336       358  
Total current liabilities     67,492       62,382  
                 
Debt     122,931       160,913  
Provisions     -       383  
Retirement benefit obligations     5,107       5,522  
Other non-current liabilities     301       879  
Deferred income taxes     850       918  
TOTAL LIABILITIES     196,681       230,997  
                 
EQUITY                
  Share capital     145,821       141,397  
  Contributed surplus     11,990       9,562  
  Retained earnings     46,854       27,037  
  Accumulated other comprehensive loss     (9,539 )     (1,556 )
TOTAL EQUITY     195,126       176,440  
                 
TOTAL LIABILITIES & EQUITY   $ 391,807     $ 407,437  
   
   
   
BAUER PERFORMANCE SPORTS LTD.  
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)  
(Expressed in thousands of U.S. dollars, except per share amounts)  
                         
                         
    For the three months ended     For the nine months ended  
    February 28,     February 28,  
    2014     2013     2014     2013  
                                 
Revenues   $ 62,197     $ 54,946     $ 333,277     $ 312,854  
Cost of goods sold     43,349       40,258       216,732       199,476  
                                 
Gross profit     18,848       14,688       116,545       113,378  
                                 
Selling, general and administrative expenses     24,501       19,361       77,810       67,060  
Research and development expenses     4,763       3,964       13,141       11,494  
                                 
Income (loss) before finance costs, finance income, other expenses and income tax expense (benefit)     (10,416 )     (8,637 )     25,594       34,824  
                                 
Finance costs     1,591       1,859       5,384       6,916  
Finance income     (5,044 )     (5,612 )     (8,148 )     (919 )
Other expenses     121       62       148       132  
                                 
Income (loss) before income tax expense (benefit)     (7,084 )     (4,946 )     28,210       28,695  
                                 
Income tax expense (benefit)     (2,199 )     (2,079 )     8,393       9,506  
                                 
Net income (loss)   $ (4,885 )   $ (2,867 )   $ 19,817     $ 19,189  
                                 
Other comprehensive income (loss):                                
                                 
  Items that may be reclassified to net income (loss):                                
    Foreign currency translation differences     (5,477 )     (2,536 )     (8,023 )     518  
                                 
  Items that will not be subsequently reclassified to net income (loss):                                
    Actuarial gains (losses) on defined benefit plans, net     28       12       40       (26 )
Other comprehensive income (loss), net of taxes     (5,449 )     (2,524 )     (7,983 )     492  
                                 
Total comprehensive income (loss)   $ (10,334 )   $ (5,391 )   $ 11,834     $ 19,681  
                                 
Basic earnings (loss) per common share   $ (0.14 )   $ (0.08 )   $ 0.56     $ 0.56  
Diluted earnings (loss) per common share   $ (0.14 )   $ (0.08 )   $ 0.53     $ 0.53  
 
 
 
BAUER PERFORMANCE SPORTS LTD.
RECONCILIATION OF GROSS PROFIT TO ADJUSTED GROSS PROFIT
(Expressed in millions of U.S. dollars)
                 
    Three Months Ended   Nine Months Ended
    February 28,   February 28,
    2014   2013   2014   2013
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
                         
Gross profit   $ 18.8   $ 14.7   $ 116.5   $ 113.4
                         
Amortization & depreciation of intangible assets     0.9     1.0     2.7     2.7
Inventory step-up / step-down & reserves     -     0.7     0.9     1.0
Other     0.1     -     0.8     -
                         
Adjusted Gross Profit   $ 19.8   $ 16.4   $ 120.9   $ 117.1
   
   
   
BAUER PERFORMANCE SPORTS LTD.  
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND TO ADJUSTED EBITDA  
(Expressed in millions of U.S. dollars)  
                         
    Three Months Ended     Nine Months Ended  
    February 28,     February 28,  
    2014     2013     2014     2013  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                                 
Net income (loss)   $ (4.9 )   $ (2.9 )   $ 19.8     $ 19.2  
                                 
Income tax expense (benefit)     (2.2 )     (2.1 )     8.4       9.5  
Depreciation & amortization     2.2       2.0       6.7       5.8  
Loss on amendment of revolving loan     -       -       -       0.3  
Interest expense, net     1.1       1.5       4.1       5.3  
Deferred financing fees     0.3       0.4       1.1       1.1  
Unrealized (gain)/loss on derivative instruments, net     (2.1 )     (4.9 )     (1.5 )     (0.2 )
Foreign exchange (gain)/loss     (1.7 )     (0.6 )     (2.8 )     (0.6 )
  EBITDA   $ (7.3 )   $ (6.6 )   $ 35.8     $ 40.4  
                                 
Acquisition Related Charges:                                
Inventory step-up / step-down & reserves     -       0.7       0.9       1.0  
Rebranding / integration costs (adjustments)     (0.2 )     0.7       1.8       2.1  
Acquisition costs     3.1       0.1       4.9       2.1  
  Subtotal   $ 2.9     $ 1.5     $ 7.6     $ 5.2  
                                 
Costs related to share offerings     0.1       0.4       0.5       0.8  
                                 
Share-based payment expense     1.1       0.9       2.9       1.9  
                                 
Other     0.2       -       0.9       -  
                                 
Adjusted EBITDA   $ (3.0 )   $ (3.8 )   $ 47.7     $ 48.3  
   
   
   
BAUER PERFORMANCE SPORTS LTD.  
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS) AND TO ADJUSTED EPS  
(Expressed in millions of U.S. dollars, except share and per share amounts)  
                         
    Three Months Ended     Nine Months Ended  
    February 28,     February 28,  
    2014     2013     2014     2013  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                                 
Net income (loss)   $ (4.9 )   $ (2.9 )   $ 19.8     $ 19.2  
                                 
Unrealized foreign exchange loss / (gain)     (3.6 )     (5.3 )     (3.3 )     (0.6 )
Costs related to share offerings     0.1       0.4       0.5       0.8  
Acquisition-related charges     3.5       2.1       9.4       6.7  
Share-based payment expense     1.1       0.9       2.9       1.9  
Other     0.2       -       0.9       0.3  
                                 
Tax impact on above items     (0.6 )     0.6       (3.7 )     (2.3 )
                                 
Adjusted Net Income (Loss)   $ (4.2 )   $ (4.2 )   $ 26.5     $ 26.0  
                                 
Average diluted shares outstanding     37,694,392       36,712,575       37,155,632       36,335,206  
                                 
Adjusted EPS   $ (0.11 )   $ (0.11 )   $ 0.71     $ 0.72  
                                 

Contact Information

  • Company Contact:
    Amir Rosenthal
    Chief Financial Officer
    Tel 1-603-610-5802
    Email Contact

    Investor Relations:
    Liolios Group Inc.
    Scott Liolios or Cody Slach
    Tel 1-949-574-3860
    Email Contact

    Media Contact:
    Tory Mazzola
    Global Communications Manager
    Tel 1-603-430-2111
    Email Contact