| 11/01/2001 | RockShox, Inc. announced its results for the second quarter of fiscal year 2002. RockShox' second quarter sales totaled $17.6 million, down from $23.4 million for the same period last year. The company's net loss for the quarter was $124,000 compared to a profit of $178,000 during the second quarter of last year. Relocation charges were $175,000 for the second quarter of 2002, compared to $764,000 for the same period last year. This past quarter, the company absorbed $821,000 in expenses related to certain patent disputes, one of which has been settled. In the second quarter of the previous year, the company funded a $2.0 million recall.
Bryan Kelln, President and Chief Executive Officer, commented, "The bicycle industry remains soft, although we are beginning to see some signs of improvement as the industry's retail sales are strengthening, and channel participants have resumed purchasing select products to fill demand. Geographically, North American sales are improving more quickly than sales in Europe. That being said, the second quarter for us remained particularly soft as channel participants remained generally reluctant to stock inventory."
Kelln continued, "Eighteen months ago we set out on a three phase restructuring program designed to return RockShox to profitability. During the second quarter, we successfully delivered on the completion of phase two, which was to complete the launch of our new manufacturing operations in Colorado Springs, which we started in the first quarter of this year. Given the factory launch, we are particularly satisfied that we met customer expected delivery dates during the quarter, and we are now building product in advance of customer requested delivery dates. Productivity trends within the operations during the second quarter were attractive, and early in the third quarter, the trends continue to reflect meaningful productivity gains."
"Given the uncertain market situation faced by the industry and RockShox's quest for profitability, the company has continued to drive costs out of the business. For example, before taking into account the costs related to the patent disputes mentioned above, selling, general and administrative expense was down 20% compared to the same period last year. In early October, the company removed another $2.0 million in annual labor costs from the business. The reductions will begin to deliver impact during the third quarter. Management continues to drive supply chain cost improvements, and RockShox has now launched its third and final phase of the restructuring initiative. Phase three is the outsourcing of the company's machine shop operations, which are expensive and under-utilized. The elimination of these operations will drive yet another downward step-change in the cost structure of the business. Because we have already taken several steps in this direction, some of the variable cost benefits will begin to be realized during the third quarter."
"While cashflow and inventory management continue to be a focus for the company, we are on track for fiscal 2002 to deliver a profitable business on significantly smaller revenues as compared to previous years. We continue to have confidence that we are poised to deliver a profitable business in the year to come," concluded Kelln.www.rockshox.com
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