Component delays dent Cannondale's profitability - BikeBiz

Component delays dent Cannondale's profitability

Cannondale Corporation today announced results for the first quarter of fiscal 2003, the period ended September 28, 2002.
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For the three months ended September 28, 2002, Cannondale's net sales grew to $37,348,000 compared to the $34,154,000 recorded for the same period last year. This growth in net sales primarily occurred in Cannondale's motorsports segment, with net sales of approximately $5,737,000 for the first quarter of fiscal 2003 compared to net sales of approximately $1,115,000 for the first quarter of fiscal 2002.

Net sales increases were partially offset by a decrease in Cannondale bicycle net sales to $31,611,000 in the first quarter of fiscal 2003 from $33,039,000 in the first quarter of fiscal 2002. This bicycle sales shortfall for the first quarter of fiscal 2003 compared to the same period last year primarily occurred in markets other than the US, as "certain suppliers were unable to deliver key component parts to us as scheduled," said Cannondale.

The net loss for the first quarter of fiscal 2003, excluding a one-time deferred financing cost write-off of approximately $1.8 million, was $6,571,000 compared to the net loss of $4,123,000 recorded for the prior-year period. Including this one-time deferred financing charge, the net loss for the first quarter of fiscal 2003 was $8,408,000. The net loss per share for the first quarter of fiscal 2003, excluding the effect of the deferred financing cost write-off, was $0.87 per share compared to the net loss per share of $0.55 recorded for the same period last year. Cannondale's net loss for the first quarter of fiscal 2003, including the deferred financing cost write-off, was $1.11.

The fiscal 2003 first quarter net loss was higher than in the prior year as a result of weaker margins, higher motorsports-related selling costs, the write-off of deferred financing costs associated with debt refinancing in July 2002, and higher interest expense resulting from our increased borrowings and interest rates.

Cannondale's bicycle business continued to be profitable for the first quarter of fiscal 2003 with pre-tax income of $628,000 compared to $2,997,000 for the first quarter of fiscal 2002 (excluding the effect of the deferred financing cost write-off). Bicycle margins decreased to 30.9% for the first quarter of fiscal 2003 from 33.5% for the prior year primarily as a result of product mix, and a lower percentage of foreign sales which provide a higher margin contribution.

"This shift in both the product and geographic mix of our bicycle sales was due to our major suppliers' inability to deliver high-end product components."

Cannondale's European bicycle order book for the first quarter of fiscal 2003 increased by double digits over the orders from the first quarter of fiscal 2002. The corporation's bicycle order book for the US for the first quarter of fiscal 2003 was the highest level in the history of the company, as was the rate of Cannondale's 2003 bicycle retail sell through in the United States.

"Although our orders reached record levels, we were unable to fill all these orders during the quarter because of the part shortages."

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