BikeBiz Bicycle and cycling retail news
[Uploaded to BikeBiz.co.uk on 8th October]
And Derby knows all about debts. As todayss story in the Mail on Sunday majors on, its said to be saddled with a crushing £270 million debt.
The proceeds of the sale of Sturmey Archers factory went to servicing these debts, and the cream from Derbys only highly profitable company, Gazelle of the Netherlands, is also being used to bolster the rest of the group, something Gazelle employees and execs are getting increasingly worried about.
Derbys CEO, Gary Matthews, told BikeBiz that Sturmey was sold not because it had a juicy piece of real estate to realise but because it was under-performing. But if this a good reason for disposing of a company (a company upon which your other companies rely on for many unique products), Derby would have to prune away everything but Gazelle.
And thats now the fear of Derby company employees around the world, as exemplified by the former Sturmey manager now working for Raleigh who told the Mail on Sunday: Everyone is really nervous. [Derby] own a lot of bicycle companies and I should think they are all quaking with what happened to Sturmey Archer.
Many execs from Derby-owned companies, including in the US and on the Continent, are reading this site regularly for the latest developments in the Derby/Lenark/Sturmey Archer story. They tell me privately they support the BikeBiz coverage but cannot comment publically.
Many have complained that whilst Derby was in the middle of selling off Raleigh and Sturmeys freeholds it was dolling up its offices. Recently nearly $2m was lavished on Derbys US HQ.
FINANCIAL INFO
The following information is extracted from EDGAR Online which itself uses material supplied by Derby. US companies have to disclose far more information than their European counterparts.
Theres some interesting stuff here, especially if you want to know about Halfords in the first quarter of the year…
Investor Research Center
August 16, 2000
DERBY CYCLE CORP
Overview
The Company is a world-leading designer, manufacturer and marketer of bicycles. The Company holds the leading market share in the United Kingdom, The Netherlands, Canada and Ireland, holds the leading market share in the adult bicycle market in Germany and is also a leading bicycle supplier in the United States. Competing primarily in the medium-to premium-priced market, the Company owns or licenses many of the most recognized brand names in the bicycle industry, including leading global brands such as Raleigh, Diamond Back, Nishiki and Univega, and leading regional brands such as Gazelle in The Netherlands and Kalkhoff, Musing, Winora and Staiger in Germany.
Through a series of acquisitions and plant expansions, the Group has created a global bicycle business distinguished by its leading market positions, low cost production, extensive distribution network and reputation for high quality. Organized in 1986 for the purpose of acquiring the Raleigh, Gazelle and Sturmey Archer bicycle and bicycle component businesses from TI Group plc, the Group expanded into the United States and Germany in 1988. From 1992 to 1993, taking advantage of substantial incentives from the German government the Group built a factory in Rostock, in the former German Democratic Republic. Since then, the Group has acquired additional well-known brands and leveraged its existing manufacturing plants and component sourcing operations to lower unit costs for its acquired businesses.
On February 4, 1999, the Company acquired the assets (and assumed certain liabilities) of the Diamond Back Group for approximately $44.3 million in cash. The Diamond Back Group consisted of Diamond Back International Company Limited, a private British Virgin Islands company ("Diamond Back"), Western States Import Company Inc., a Delaware corporation ("Western States") and Bejka Trading A.B., a private Swedish company ("Bejka"), each of which was engaged in the bicycle, bicycle parts and accessories and fitness equipment distribution business. Western States and Bejka had worldwide revenues of approximately $62.9 million and $3.1 million, respectively, in 1998.
The Company financed the acquisition of the Diamond Back Group by issuing $20 million principal amount in a Subordinated Note to Vencap Holding (1992) PTE Ltd. and $22.75 million in Class C common stock to DC Cycle, L.L.C. and Perseus Cycle L.L.C. The Subordinated Note matures in 2010 and bears interest at an annual rate of 19% compounded daily.
On June 30, 2000 the Company sold the business and assets of Sturmey Archer which was engaged in the manufacturing of bicycle components and other engineering components. The purchaser assumed $4.0 million of liabilities in consideration of the sale. Sturmey Archer had revenues of $20.6 million and EBITDA of $0.6 million in 1999.
In 1999, 54% of the Company’s net revenues, excluding Sturmey Archer, were denominated in currencies, linked to the Euro, 22% were denominated in U.S. dollars, 14% were denominated in pounds sterling and 10% were denominated in other currencies. The Company reduces its currency exposure by maintaining operations in the major markets in which it sells its products.
Results of Operations
The Company manages its business in six major operating units as shown in the following table. Consolidation adjustments, certain small operating companies, non-operating companies and the headquarters are included in "Other companies". All comparisons in the following discussion and analysis are against the corresponding quarter and six months ended June 27, 1999, unless otherwise stated. Operating unit figures for 1999 have been re-translated using 2000 foreign exchange rates to facilitate comparison. The results of Sturmey Archer for 1999 and 2000 have been excluded.
Units sold: Quarter ended Six months ended
———————– ———————–
Jun 27, Jul 2, Jun 27, Jul 2,
Thousands of bicycles 1999 2000 1999 2000
——– ——– ——– ——–
Raleigh U.K………………………………………… 125 97 195 161
Gazelle……………………………………………. 108 121 200 232
Derby Germany………………………………………. 200 256 378 461
Derby U.S.A………………………………………… 161 129 246 225
Raleigh Canada……………………………………… 74 93 205 237
Probike……………………………………………. 26 41 59 85
Other companies and group transactions………………… 4 5 5 7
——– ——– ——– ——–
Total units sold………………………………….. 698 742 1,288 1,408
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Units sold. Units sold increased by 44 thousand units and 120 thousand units for the quarter and six months ended July 2, 2000. Organic growth achieved was 42 thousand units and 73 thousand units in each period compared with year ago, representing an annual volume growth rate of approximately 6%. 16 thousand units of the increase represented Diamond Back sales in January 1999 not included in the 1999 results as that business was acquired on February 4, 1999 and 33 thousand units of the increase related to the 5 days through July 2, 1999 included in the third quarter’s results in 1999. Particularly strong growth was seen at Gazelle and Derby Germany following successful product range launches, advertising and lower retail inventories.
The change in sales volume at Raleigh U.K. arose because a major customer ended 1999 with excess inventory and cut back its purchase from 12 thousand units in the first quarter of 1999 to less than 1 thousand units in the first quarter of 2000, while sales also suffered from less availability from stock due to the longer lead-time on out-sourced frames compared with in-house manufacture which ceased in December 1999: this is estimated to have caused the loss of sales of 15,000 units.
Net revenues: Quarter ended Six months ended
———————– ———————–
Jun 27, Jul 2, Jun 27, Jul 2,
$ millions 1999 2000 1999 2000
——– ——– ——– ——–
Raleigh U.K………………………………………… $ 20.2 $ 16.5 $ 33.3 $ 28.8
Gazelle……………………………………………. 35.0 41.7 65.5 79.8
Derby Germany………………………………………. 44.0 60.7 83.7 109.1
Derby U.S.A………………………………………… 37.7 30.8 59.0 55.7
Raleigh Canada……………………………………… 6.5 8.1 18.6 20.6
Probike……………………………………………. 2.8 3.6 6.5 7.6
Other companies and group transactions………………… 2.8 4.0 6.1 7.4
——– ——– ——– ——–
Total at comparable foreign exchange rates…………… 149.0 165.4 272.7 309.0
Re-translation to actual foreign exchange rates………. 12.5 – 22.5 –
——– ——– ——– ——–
Total net revenues as reported……………………… $ 161.5 $ 165.4 $ 295.2 $ 309.0
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