Cannondale Announces Financial Results For the Q3 of Fiscal
Year 2001
BETHEL, Conn., April 30 Cannondale Corporation today announced results for the third
quarter of fiscal 2001, the period ended March 31, 2001.
For the three months ended March 31, 2001, net sales were $32,636,000
compared to $40,308,000 recorded for the same period last year. Included in
the net sales amount is approximately $1.7 million in motorsports sales. The
reduction in sales was due to dealers' cautious buying patterns relating to
the weakening economy, adverse weather conditions, and a delay in delivery of
bicycle accessories from vendors which affected shipments in March. In
addition, net sales were negatively affected by approximately $1.2 million
relating to foreign exchange fluctuations. The loss for the third quarter of
fiscal 2001, prior to the recognition of $2,287,000 to record a valuation
allowance for net deferred tax assets, was $3,064,000 compared to the loss of
$762,000 recorded during the same period last year. Although the Company
expects to ultimately utilize its net deferred tax assets, a valuation
allowance was established in accordance with Statement of Financial Accounting
Standards No. 109. The Company's bicycle business achieved pre-tax earnings
of $559,000 for the third quarter of fiscal 2001 compared to pre-tax earnings
of $2,021,000 for the third quarter of fiscal 2000. The decrease in profits
is commensurate with the factors noted above.
The loss per share for the third quarter of fiscal 2001 was 41 cents,
exclusive of the deferred tax asset valuation provision (30 cents per share),
compared to the loss per share of 10 cents recorded for the same period last
year. The net loss per share for the third quarter of fiscal 2001 was
71 cents.
For the nine months ended March 31, 2001, net sales were $104,010,000,
including approximately $3.2 million of motorsports shipments, compared to net
sales of $118,393,000 recorded for the same period last year. The reduction
in sales was due to dealers' cautious buying patterns relating to the
weakening economy, adverse weather conditions, and a delay in delivery of
bicycle accessories from vendors which affected shipments in March. In
addition, net sales were negatively affected by approximately $6.5 million
relating to foreign exchange fluctuations. The loss for the first nine months
of fiscal 2001, prior to an extraordinary loss of $552,000 relating to the
write-off of deferred financing costs resulting from the early repayment of
approximately $12,000,000 of long-term debt, and the recognition of
$10,890,000 to record a valuation allowance for net deferred tax assets, as
noted above, was $6,107,000 compared to the loss of $1,593,000 recorded during
the prior-year period. For the first nine months of fiscal 2001, the
Company's bicycle business produced pre-tax earnings of $4,548,000 compared to
the bicycle business pre-tax earnings of $3,892,000 for the same period last
year. This increase in the bicycle business profit was attributable to the
increase in gross margin from 32.03% in the prior year to 32.40% in the
current year primarily due to more favorable product mix, coupled with reduced
selling, general and administrative expenses.
The loss per share was 81 cents for the first nine months of fiscal 2001,
exclusive of the extraordinary loss (7 cents per share) and the deferred tax
asset valuation provision ($1.45 per share), compared to the net loss per
share of 21 cents recorded for the same period last year. The net loss per
share for the first nine months of fiscal 2001 was $2.33.
On April 27, 2001, Cannondale sold an aggregate of $4 million of
convertible subordinated debentures to two individual investors, including
Cannondale's Chairman, Chief Executive Officer and President, Joseph
Montgomery. The $2 million debenture issued to Mr. Montgomery is due June 28,
2005 and is convertible into shares of Cannondale's common stock at an initial
conversion price of $4.50 per share. The $2 million debenture issued to a
third party investor is due April 28, 2004 and is convertible into shares of
Cannondale's common stock at an initial conversion price of $3.75 per share.
Both debentures bear interest at an annual rate of 8%. Cannondale intends to
use the net proceeds from the sale of the debentures for working capital
purposes.
Prior year net sales and selling, general and administrative expenses have
been restated pursuant to EITF Issue 00-10, Accounting for Shipping and
Handling Fees and Costs. In accordance with such, all shipping and handling
billings to customers have been included in net sales, and all freight costs
incurred for product shipments have been included in selling, general and
administrative expenses. Previously, the Company offset shipping and handling
charges billed to customers and the related freight costs within selling,
general and administrative expenses. For the quarterly periods ended
March 31, 2001 and April 1, 2000, shipping and handling billings of
approximately $373,000 and $442,000, respectively, have been included in net
sales. For the nine months ended March 31, 2001 and April 1, 2000, shipping
and handling billings of approximately $1,186,000 and $1,368,000,
respectively, have been included in net sales.
The third quarter also saw the official debut of the Cannondale FX400 ATV
(All-Terrain Vehicle), and its first test rides by editors from ATV magazines.
The reviews resulting from those test rides have appeared in recent weeks, and
they are exceedingly positive.
"The FX400 is a thrilling addition to the sport quad market," was how ATV
Sport magazine's Glenn Hanson rated the new Cannondale. "If (other ATV
manufacturers) want to compete on the high end of the high-performance market,
they better be working on something good or the FX400 will eat them alive."
Hansen's comments were echoed by Adam Campbell of 4-Wheel ATV Action magazine,
who dubbed the FX400 "the highest-tech quad ever developed." Campbell added
that, "in a contest of all-out performance with the Cannondale, it looks like
Honda, Yamaha and Bombardier brought knives to a gun fight."
Cannondale's bicycle division also debuted new designs during the third
quarter. In March, the Company unveiled the downhill-specific Gemini and the
Scalpel, a lightweight, full-suspension model for cross-country racing. The
Scalpel will be raced by the team's cross-country athletes, and Scalpel models
will also make their way into Cannondale dealerships for resale to consumers
in the coming months.
Matt Phillips of Mountain Bike magazine was one of the first editors to
ride the Scalpel, and he was wowed by its technology. After listing the
Scalpel's many innovative features, Phillips noted that "this complete full
suspension bike with tubeless tires and disc brakes weighs just 22 pounds. I
shake my head and think, 'Who else but Cannondale?'"
CANNONDALE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
March 31, 2001 July 1, 2000
(unaudited)
Assets
Current assets:
Cash $1,920 $5,064
Trade accounts receivable, less allowances of
$11,146 and $10,076 47,833 50,224
Inventories 42,861 40,413
Deferred income taxes -- 5,571
Prepaid expenses and other current assets 3,719 4,618
Total current assets 96,333 105,890
Property, plant and equipment, net 36,352 40,114
Other assets 5,703 18,903
Total assets $138,388 $164,907
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $13,970 $15,912
Revolving credit advances 4,038 2,235
Income taxes payable 27 307
Warranty and other accrued expenses 8,742 7,403
Current installments of long-term debt 4,856 4,577
Total current liabilities 31,633 30,434
Long-term debt, less current installments 54,760 63,363
Other noncurrent liabilities 437 424
Total liabilities 86,830 94,221
Commitments and contingencies -- --
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued shares - 8,821,871 and 8,808,125 88 88
Additional paid-in capital 57,978 57,935
Retained earnings 21,253 38,802
Less 1,292,900 shares in treasury at cost (20,162) (20,162)
Accumulated other comprehensive loss (7,599) (5,977)
Total stockholders' equity 51,558 70,686
Total liabilities and stockholders' equity $138,388 $164,907
CANNONDALE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Third Third Nine Nine
Quarter Quarter Months Months
Fiscal Fiscal Fiscal Fiscal
2001 2000 2001 2000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $32,636 $40,308 $104,010 $118,393
Cost of sales 25,895 27,233 77,089 81,631
Gross profit 6,741 13,075 26,921 36,762
Expenses:
Selling, general and
administrative 9,005 10,607 27,275 30,484
Research and development 1,500 2,432 5,417 6,621
10,505 13,039 32,692 37,105
Operating income (loss) (3,764) 36 (5,771) (343)
Other income (expense):
Interest expense (1,486) (1,901) (5,036) (4,305)
Other income (expense) (199) 531 192 1,265
(1,685) (1,370) (4,844) (3,040)
Pretax loss (5,449) (1,334) (10,615) (3,383)
Income tax benefit 2,385 572 4,508 1,790
Loss before provision for
deferred tax asset valuation
and extraordinary item (3,064) (762) (6,107) (1,593)
Deferred tax asset
valuation provision (2,287) -- (10,890) --
Loss before
extraordinary item (5,351) (762) (16,997) (1,593)
Extraordinary loss,
net of $0 tax benefit -- -- (552) --
Net loss $(5,351) $(762) $(17,549) $(1,593)
Basic and diluted loss per
share before
extraordinary item $(0.71) $(0.10) $(2.26) $(0.21)
Extraordinary loss per share -- -- (0.07) --
Basic and diluted
loss per share $(0.71) $(0.10) $(2.33) $(0.21)
Weighted-average common
shares outstanding 7,529 7,503 7,520 7,495
