The official RockShox press release was emailed late yesterday.
Third quarter sales totaled $20.3 million, down from $25.5 million for the same period last year. Despite the reduction in sales, net income rose by $2.0 million to $380 thousand. Last years third quarter results produced a net loss of ($1.6) million (this included a $2.7 million write off of deferred tax assets). One-time business relocation charges included in third quarter earnings totaled $670 thousand. On a year-to-date basis, sales are up 10% to $56.0 million, versus $51.0 million for the same period last year. Income before the product recall (reflected in second quarter results) and before the one-time charges for the business relocation, has increased $9.4 million to $1.7 million. Even after the one-time business relocation charges and the recall, net income has improved by $5.0 million to ($2.7) million.
"The third quarter was a particularly challenging one for the team here at RockShox. During October and November, we spent most of our collective time executing the product recall announced in early October. We have received generally positive feedback on our performance. We repaired nearly all of the 225,000 units in 26 countries in less than 60 days. While it was not a pleasant experience, our team once again demonstrated its commitment to the company, our customers and the turnaround. To be clear, we had tremendous teamwork and cooperation from our wonderful OE customers, and the independent bike dealers which serve as our lifeline to the consumer," said RockShox President and CEO Bryan Kelln.
"While we have not yet incurred the full cost of the recall, we believe the $2 million charge accrued in the second quarter is adequate."
"Throughout the year, we have remained very focused on our 2002 product line. Next years line is much further along in the development process as compared to last year, and we believe it will be even more creative, of better quality, and with improved cost and manufacturability," said Kelln.
Chris Birkett, Chief Financial Officer, said: "The year-over-year third quarter sales decline can be explained by two fundamental factors. First, the recall had a direct impact on our third quarter sales, as we lost perhaps $1 million to $2 million in sales. Second, we believe there is a trend in the market to build bicycles earlier in the year, which in turn pulled orders backward in time, in this case from the third quarter to the second quarter.