The Hockey Company Holdings Inc. repported that net sales for the first quarter ended March 31, 2004 were $42.6 million, an increase of $4.8 million or 12.7% compared with last year. Gross margin grew by $2.6 million or 15.3% to $19.3 million or 45.3% of sales compared with
$16.7 million or 44.2% in 2003. Operating income was down slightly from $1.0 million in 2003 to $0.7 million in 2004, due principally to the fixed costs associated with the new operations of Roger Edwards Sport division and
distribution operations in Central Europe where the cyclical nature of the businesses are such that sales revenue and related profits are generated later
in the year.
EBITDA amounted to a loss of $0.2 million in the first
quarter compared to a gain of $7.1 million in 2003, with $5.7 million of the decrease attributable to an unrealized foreign exchange loss on long-term debt (a loss of $1.1 million in 2004 compared with a gain of $4.6 million in 2003). Other unusual charges of $1.3 million include costs associated with Reebok's tender offer to acquire the shares of the Company, a reserve for environmental
remediation at one of the Company's facilities and restructuring charges associated with the planned closure of our Cap-de-la-Madeleine apparel manufacturing facility. In 2003, by contrast, we recorded a $0.5 million gain
on the sale of our Drummondville manufacturing facility. Excluding these unusual items, our operating performance has improved versus 2003.
An after-tax loss of $4.4 million or $0.36 per share was recorded in the first quarter of 2004 compared to net income of $1.0 million or $0.14 per share in 2003, with the main reason for the swing being the volatility
associated with the unrealized foreign exchange impacts in each year. The Company reports its results in United States currency. However, because it is established internationally and operates in local currencies, foreign exchange rate fluctuations play a part in the reported results.
Sales for the first three months of 2004 were positively impacted by approximately $3.4 million compared with a year ago on a constant dollar basis. Similarly, operating and other expenses were negatively impacted, reducing the overall impact on the Company's reported earnings. The foreign exchange loss on the long-term debt amounted to approximately $0.9 million on an after-tax basis for the three months ended March 31, 2004 compared with a
gain of $3.6 million in 2003.
Sales in the first quarter were up approximately 4% over last year on a constant dollar basis, reflecting very strong demand in composite hockey sticks, especially the new CCM Vector 120 one-piece stick, and in Licensed
Apparel, especially NHL replica jerseys, also driving a favourable sales mix
at the gross margin level. Other product categories remained comparable with
last year.
The Company also made two acquisitions at the beginning of 2004. On
January 5, 2004, it acquired the assets, consisting primarily of inventory, of
Norbert Ewald GmbH (Ewald Sport Service) in Germany. Ewald, a former
distributor of the Company's products, is a leading hockey equipment
distributor in Germany. This acquisition will continue to strengthen our
existing presence in the Central European hockey market. On January 16, 2004,
the Company purchased a 33 1/3% ownership stake in t'blade, Inc., the
exclusive marketer and distributor of t'blade replaceable ice skate blade
products and technology in North America.
On April 8, 2004, Reebok International Ltd. announced plans to acquire
all of the Company's outstanding shares for Canadian $21.25 per share in cash.
On April 22, 2004 the Offer, Directors' Circular and related documents were
mailed to shareholders. The Offer will expire at 5:00 p.m., Montreal time, on
May 28, 2004, unless withdrawn or extended. The Offer is subject to customary
conditions of completion including receipt of all necessary regulatory
approvals and acceptance of the Offer by Company shareholders holding an
aggregate of not less than 66 2/3% of the Company's common shares on a fully-
diluted basis.
“Overall, our operating results are in line with our plan,” Matt O'Toole,
President and Chief Executive Officer, commented. “The first quarter of 2004
continued several positive trends for The Hockey Company. First, strong
consumer acceptance of our new high-performance products continues to
reinforce CCM's leading position as an innovator in the hockey category.
Second, this shift to premium products has resulted in continued expansion of
the Company's gross margin contribution. Finally, our products and services
have allowed us to forge long-term partnerships with the most important hockey
leagues around the world, now including the American Hockey League and the
ECHL.
The overall industry environment continues to be clouded by the
possibility of a work stoppage in the NHL next fall. While this situation
presents several challenges, we have made plans to mitigate the impact on the
Company's results if an interruption in play were to occur.”
Mr. O'Toole continued, “With the assumption that the Reebok offer will be
accepted by the shareholders I would like to take this opportunity to thank
our Board of Directors and our existing shareholders for the confidence and
support they have shown, some for many years, others since the Company went
public in 2003. It has been very exciting and I look forward to the new
opportunities that lie ahead for The Hockey Company.”
The Hockey Company Holdings Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(All amounts in thousands of U.S. dollars, except share data)
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For the Three
Months ended
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March 31, 2004 March 31, 2003
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Net sales $ 42,597 $ 37,779
Cost of goods sold 23,043 21,071
Restructuring and unusual charges 282 -
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Gross profit 19,272 16,708
Selling, general and administrative
expenses 18,540 15,732
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Operating income 732 976
Other expense (income), net 813 (637)
Interest expense 3,928 4,693
Foreign exchange loss (gain) 1,409 (4,378)
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Income (loss) before income taxes (5,418) 1,298
Income taxes (recovery) (1,044) 292
--------------------------------
Net income (loss) (4,374) 1,006
Retained earnings (deficit),
beginning of period 13,034 (5,537)
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Retained earnings (deficit), end of period $ 8,660 $ (4,531)
--------------------------------
--------------------------------
Earnings (loss) per share:
- Basic and diluted $ (0.36) $ 0.14
Weighted average number of outstanding
shares:
- Basic and diluted 12,134,603 7,199,435
