Bauer Performance Sports Ltd. reported revenues in its second quarter ended Nov. 30 rose 7 percent to $117.1 million while advancing 9 percent in constant currencies. Adjusted n Net Income increased 3 percent to a record $7.5 million or 20 cents per share
Management Commentary
"Strong global demand for our products, consistent execution in sales and marketing, and the strength of our operational platform drove another quarter of record revenues and profitability," said Kevin Davis, President and CEO of Bauer Performance Sports. "In our hockey business, we continued to see strong sell-through of our products while overall inventory levels at retail continue to improve. We believe our second quarter results further validate our multi-sport growth strategy and our ability to deliver strong results in a challenging retail environment.
"Looking ahead, we believe our global operational model will provide a strong platform for organic growth as we also pursue an acquisition strategy designed to advance Bauer Performance Sports as one of the world's leading developers of high performance sports equipment and apparel. We are enthusiastic about our growing pipeline of opportunities and fiscal 2014 is on track to be another year of record top and bottom-line performance, even in the face of recent currency headwinds."
Fiscal Q2 2014 Financial Results
Revenues in the fiscal second quarter of 2014 increased 7 percent to $117.1 million compared to $109.6 million in the same year-ago quarter. On a constant currency basis, revenues were up 9 percent. The increase was primarily due to strong growth across all apparel categories, the addition of Combat, and a 14 percent increase in lacrosse revenues. Apparel revenues increased 60 percent in the quarter due to the addition of hockey and soccer uniform sales, as well as a 28 percent increase in lifestyle apparel and a 21 percent increase in off-ice team apparel.
Adjusted Gross Profit (a non-IFRS measure) in the second quarter was virtually unchanged at $39.6 million. As a percentage of revenues, Adjusted Gross Profit was 33.8 percent compared to 36.2 percent in the year-ago quarter. The decrease in adjusted gross margin was primarily due to significant growth in the company's team business, particularly uniforms which initially carry a lower gross margin as capacity builds, and higher freight costs required to meet customer demand (see "Non-IFRS Measures" below for further discussion).
Selling, general and administrative ("SG&A") expenses in the second quarter increased 11 percent to $27.3 million compared to $24.6 million in the year-ago quarter, primarily due to the addition of Combat and the inclusion of a full quarter of Inaria expenses. As a percentage of revenues and excluding acquisition-related charges, costs related to share offerings and share-based payment expense, SG&A expenses remained relatively unchanged at 20.5 percent compared to 20.0 percent in the year-ago quarter.
Adjusted Net Income (a non-IFRS measure) in the second quarter increased 3 percent to $7.5 million, or $0.20 per diluted share, compared to Adjusted Net Income of $7.3 million, or $0.20 per diluted share, in the second quarter of 2013, demonstrating the ability of the company's diversified platform to deliver strong results.
At November 30, 2013, working capital was $222.2 million compared to $215.1 million one year ago, primarily due to the addition of Combat working capital, and total debt was $152.4 million compared to $173.9 million at November 30, 2012. The company's leverage ratio, defined as average net indebtedness divided by trailing twelve month EBITDA (a non-IFRS measure), continued to decline and stood at 2.67x as of November 30, 2013 compared to 2.69x one year ago.
Fiscal Q2 2014 Operational Highlights
BauerWorld 2014 - the company's largest and industry-leading event with more than 600 attendees from around the world - expanded beyond hockey to include all brands across the BPS platform: BAUER (ice and roller hockey), MISSION (roller hockey), MAVERIK and CASCADE (lacrosse), COMBAT (baseball and softball), and INARIA (soccer). Key retail partners across these sports were provided with the advanced opportunity to see and try products that will be available at retail beginning spring 2014.
BPS and Cocona Natural Technologies unveiled 37.5 technology for hockey. The advanced, fast-drying moisture management process will debut in BAUER's hockey base layer, training apparel and protective equipment in spring 2014.
BPS entered into a multi-year, exclusive partnership with G-Form LLC, a recognized leader in the design and development of impact protection for elite athletes and consumer products. The partnership will utilize patented technologies developed by both companies to launch FLEXORB, an innovative new material to be used in numerous protective products across the BPS platform.
Six Month Fiscal 2014 Financial Results
Revenues in the first six months of fiscal 2014 increased 5 percent to $271.1 million compared to $257.9 million in the same period a year ago. On a constant currency basis, revenues were up 6 percent.
Adjusted Gross Profit (a non-IFRS measure) in the first six months was virtually unchanged at $101.1 million. As a percentage of revenues, Adjusted Gross Profit was 37.3 percent compared to 39.0 percent in the year-ago period.
SG&A expenses increased 12 percent to $53.3 million compared to $47.7 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 17.4 percent compared to 16.6 percent of revenues in the same period a year ago.
Adjusted Net Income (a non-IFRS measure) in the first six months of 2014 increased 2 percent to $30.7 million, or $0.83 per diluted share, compared to $30.2 million, or $0.84 per diluted share, in the first six months of fiscal 2013.
