Global Motorsport Reports Third Quarter Results
19 November 1998
Global Motorsport Reports Third Quarter Results
MORGAN HILL, CA--November 19, 1998--Global Motorsport Group, Inc. (formerly Custom Chrome, Inc.) today reported results for the three and nine month periods ended October 31, 1998.
Third Quarter Results
Net sales for the three months ended October 31, 1998 rose 26.5% to $38,526,000 from $30,450,000 in the like period of the prior year. Net sales for the third quarter of the current and prior year include sales of $8.5 million and $4.3 million respectively, for its Chrome Specialties unit, which was acquired by the Company in September of 1997.
Net income for the three months ended October 31, 1998, excluding the after tax impact of costs of approximately $926,000 or $0.17 per share related to the Company's defense against the unsolicited tender offer by Golden Cycle to purchase the Company, and a tax charge to reflect a tax judgement from prior years of $725,000 or $0.13 per share, was $1,828,000 or $0.34 per share on a diluted basis. This compares with net income of $82,000, or $0.02 per share on a diluted basis in the same period last year. Net income for the third quarter, including the costs associated with the tender offer defense and the prior year tax charge was $177,000 or $0.03 per share, on a diluted basis.
Operating income for the third quarter was $3,774,000, excluding the impact of pre-tax costs of $1,556,000 related to the unsolicited tender offer defense, an increase of almost 4 times the operating income of $962,000 in the third quarter of last year.
During the third quarter of the fiscal year, the Company also reduced total net debt by $1.7 million, from $51.5 million on July 31, 1998 to $49.8 million at October 31, 1998. This resulted in a net debt reduction of $19.1 million for the first nine months of this fiscal year.
Nine Months Results
Net sales for the nine months ended October 31, 1998 rose 36% to $128,647,000 from $94,455,000 in the like period of the prior year. Net sales for the first nine months of the current and prior year included sales of $30.2 million and $4.3 million, respectively, for its Chrome Specialties unit, which was acquired by the Company in September of 1997.
Net income for the nine months ended October 31, 1998, excluding the after tax impact of costs of approximately $1,941,000 or $0.35 per share related to the Company's defense against the unsolicited tender offer by Golden Cycle to purchase the Company and a tax charge to reflect a tax judgement from prior years of $725,000 or $0.13 per share, was $7,680,000 or $1.40 per share on a diluted basis. This represents an increase of 55% from net income of $4,950,000 or $0.92 per share on a diluted basis in the same nine months of the prior year. Net income for the nine months ended October 31, 1998, including the costs associated with the tender offer defense and the prior year tax charge was $5,014,000 or $0.92 per share, on a diluted basis.
Operating income for the nine months ended October 31, 1998 was $16,364,000, excluding the impact of pre-tax costs of $3,263,000 related to the unsolicited tender offer defense, an increase of 65% from operating income of $9,911,000 in the same period of the prior year.
Joseph F. Keenan, Chairman of the Board of Global Motorsport Group, Inc. stated: "We are very proud of the financial results achieved by the Company in the last three months and throughout this fiscal year despite the distractions of the Company's defense against an unsolicited tender offer. The team spirit, dedication and enthusiasm demonstrated by the employees, management and your Board resulted in the Company meeting or exceeding its goals in profitability and working capital management."
Global Motorsport Group, Inc. was founded in 1970 and it is the parent organization for an international group of motorcycle aftermarket providers that focus their business on Harley-Davidson motorcycles sold worldwide. Global's organization includes Custom Chrome, the leading aftermarket supplier of Harley-Davidson motorcycle parts and accessories; Chrome Specialties, an aftermarket supplier of Harley-Davidson motorcycle parts and accessories located in Fort Worth, Texas, Custom Chrome Far East, a product development, engineering, tooling management and warehouse of proprietary products for Global, located in Taiwan; Custom Chrome Europe, a distribution company located Germany that specializes in aftermarket accessories for Harley-Davidson motorcycle and other "cruiser" motorcycles, and Santee Industries, a manufacturer of frames and exhaust systems and other aftermarket components for Harley-Davidson motorcycles, located in California.
Global Motorsport Group, Inc.
Consolidated Balance Sheets
( In thousands, except share data)
( Unaudited )
October 31, October 31, January 31,
1998 1997 1998
---------- ---------- ----------
---------- ---------- ----------
ASSETS
Current Assets
Cash and cash equivalents $ 1,379 $ 1,879 $ 1,432
Accounts receivable, net 13,509 13,148 12,958
Merchandise inventories 53,941 58,785 66,338
Deferred income taxes 3,055 1,334 3,079
Prepaid income taxes 1,026 2,378 1,926
Deposits and prepaid 2,519 2,913 2,614
expenses
---------- ---------- ----------
---------- ---------- ----------
75,429 80,437 88,347
Property and equipment, net 18,450 18,223 18,408
Other assets 35,299 35,339 35,327
---------- ---------- ----------
---------- ---------- ----------
$ 129,178 $ 133,999 $ 142,082
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of
long-term debt and
capital lease obligations $ 4,137 $ 3,194 $ 4,176
Bank borrowings - 4,014 13,741
Accounts payable 4,478 6,795 6,757
Accrued expenses and other 6,824 3,694 4,775
liabilities --------- -------- --------
--------- -------- --------
15,439 17,697 29,449
Long term debt and capital 46,998 53,394 52,302
lease obligations
Deferred income tax 1,283 817 988
Shareholders' equity
Common stock, $.001 par value:
20,000,000
shares authorized:
5,458,973 issued and 5,182,973
shares outstanding as of
October 31, 1998;
5,353,442 issued and 5,077,442
outstanding
as of October 31,1997;
and 5,358,312 issued
and 5,082,312 shares
outstanding as of
January 31, 1998 6 6 5
Additional paid-in capital 30,077 29,056 28,977
Retained earnings 35,375 33,029 30,361
--------- -------- --------
--------- -------- --------
65,458 62,091 59,343
Commitment and contingencies
--------- -------- --------
--------- -------- --------
$ 129,178 $ 133,999 $ 142,082
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Global Motorsport Group, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
For three For nine
months ended months ended
October 31 October 31
1998 1997 1998 1997
Sales, $ 38,526 $ 30,450 $ 128,647 $ 94,455
net
Cost 23,637 19,498 79,835 59,334
of
Sales
Gross 14,889 10,952 48,812 35,121
Profit
Operating
Expenses
Selling, 10,739 9,643 31,365 24,162
general
and
administrative
Costs 1,556 -- 3,263 --
associated
with
unsolicited
tender
offer
Product 376 347 1,041 1,048
development
12,671 9,990 35,669 25,210
Operating 2,218 962 13,143 9,911
income
Interest 869 814 3,498 1,687
expense
Income 1,349 148 9,645 8,224
before
income
taxes
Income 1,172 66 4,631 3,274
taxes
Net $ 177 $ 82 $ 5,014 $ 4,950
Income
Net $ 0.03 $ 0.02 $ 0.97 $ 0.97
Income
per
share,
basic
Net $ 0.03 $ 0.02 $ 0.92 $ 0.94
income
per
share,
diluted
Shares
outstanding:
Basic 5,174,000 5,056,000 5,160,000 5,126,000
Diluted 5,365,000 5,314,000 5,472,000 5,260,000
Global Motorsport Group , Inc.
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
For nine months ended
October
1998 1997
---------- ----------
---------- ----------
Cash Flow from operating activities:
Net income $ 5,014 $ 4,950
Adjustments to reconcile net income to net
cash provided ( used) by operating
activities:
Depreciation and amortization 3,557 2,097
Deferred income tax 319
Changes in items affecting
operations:
Accounts receivable (655) 1,219
Merchandise inventories 12,397 981
Deposits & prepaid expenses 995 181
Accounts payable, accrued (126) 3,806
expenses & other liabilities ---------- ----------
---------- ----------
Net cash provided by operating activities 21,501 13,234
---------- ----------
---------- ----------
Cash flow from investing activities:
Purchase of intangible assets (733) (26,376)
in connection
with acquisition
Purchase of equipment in connection - (770)
with acquisition
Purchase of net current assets - (12,383)
in connection
with acquisition
Acquisition costs - (1,966)
Additions to property and equipment (2,838) (3,474)
---------- ----------
---------- ----------
Net cash used by investing activities (3,571) (44,969)
---------- ----------
---------- ----------
Cash flow Ron financing activities
Bank repayment, net (13,741) (2,369)
Repayment on capital lease
obligations and long term debt (5,343) 38,646
Issuance of common stock 1,101 786
Repurchase of common stock (3,489)
---------- ----------
---------- ----------
Net cash (used in) provided by (17,983) 33,574
financing activities ---------- ----------
---------- ----------
Net change in cash and cash equivalents (53) 1,839
Cash and cash equivalents at beginning 1,432 40
of period ---------- ----------
---------- ----------
Cash and cash equivalents at end of period $ 1,379 $ 1,879
========== ==========
========== ==========
Supplemental dislcosures of cash paid
during the period
Interest $ 3,498 $ 1,878
========== ==========
========== ==========
Income taxes $ 1,581 $ 3,107
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