Derby Cycle Reports Big Drops in Revenues and Operating Income

STAMFORD, USA (August 20) - The Derby Cycle Corporation filed its financial report for the quarter which ended on July 1 at the Washington Security and Exchange Commission (SEC). This report shows big drops in both net revenues and operating income. According to Simon J. Goddard, Vice President and Corporate Controller, 'The decline in revenues largely mirrored a decline throughout the market of sales to independent bicycle dealers.' Net revenues totalled US$ 126.0 million which is 25% down compared to a year ago. Operating income however, showed an even bigger drop. Compared to US$ 10.8 million a year ago, the 2001 2nd quarter figure was US$ 2.6 million which accounts for a gross drop of operating income of US$ 8.2 million. The operating income of the Derby Cycle Corporation thus dropped 75.9%. The huge drop in operating income was caused by the fact that selling, general and administrative expenses could not be reduced as quickly as the decline in revenues. Gross margins were held at 25.7% of revenues. Simon J. Goddard adds in his report to the Washington Security and Exchange Commission that the operating income was also affected by '$2.1 million of fees for financial advisory services and related professional advice for the review of the business and exploration of alternatives in order to repay the Revolving Credit Facility in the quarter ending July 1, 2001.' Due to the decline in revenues, the Derby Cycle Corporation managed to reduce its levels of inventories and accounts receivable, such that the cash flow improved compared with a year ago. The financial report for the second quarter of 2001 contains no detailed statements about the number of bikes sold by Raleigh Industries or the Derby Cycle Werke in Germany. Simon J. Goddard explains in his SEC Report, 'The management of Derby Cycle Corporation has devoted substantial time and effort to the sale of all of the issued and outstanding stock of its former subsidiary, Koninklijke Gazelle B.V. (Gazelle), and, with the help of its financial advisors, Lazard Freres & Co. L.L.C., to explore alternatives for refinancing or restructuring the Company's indebtedness. Because of the resources devoted to the sale of Gazelle and to the exploration of restructuring or refinancing alternatives, the Derby Cycle Corporation has not been able to complete and file the forms by the date required without unreasonable effort or expense.(JO)