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A Different Kind of Biker
Cannondale Corp.
(NASDAQ: BIKE)
16 Trowbridge Drive
Bethel, Conn. 06801
203-749-7000
www.cannondale.com
Chairman, president and chief executive officer: Joseph S. Montgomery
Operating revenues (FYE June 30, 2001): $146.79 million
Margin: -13.6%
Market Capitalization (June 11, 2002): $21 million
No. of employees: 773
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Business New Haven
6/24/2002
By: BNH
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In 1971, erstwhile sailor Joseph S. Montgomery manufactured the first bicycle trailer - and his products have been associated with the land ever since. Today, the company he founded and continues to lead as president and CEO, the Cannondale Corp., is the leading manufacturer of aluminum bicycles worldwide. In the last fiscal year, the bicycle division, which Cannondale introduced in 1983, accounted for 80 percent of the company's sales.
Cannondale's bicycle division includes 84 models of high-end bicycles (a mix of road bikes, mountain bikes and a bicycle that is a hybrid in comfort and performance between the two) as well as bicycle accessories such as such as clothing, packs and bags. Its motorsports division, which includes off-road motorcycles and the four-wheel all-terrain vehicle (ATV) or “quad” was introduced in 1999. The majority of the company's sales are domestic.
What distinguishes Cannondale, whose headquarters are located in Bethel, from many other high-end bicycle producers is that its products are completely manufactured in the United States. Cannondale has two facilities in Bedford, Penn., where its bicycle and motocross products are constructed. Although some of its bicycles are assembled at its subsidiary in Holland, the function of its subsidaries in Japan and Australia is strictly sales.
Among its competitors are Trek, which imports many of its products from China, and Specialized, 49 percent of which is now owned by a company in Taiwan.
What Cannondale, whose stock peaked at $22.94 in 1998 before falling to $2.02 last November, is counting on is an extended boom in motocross sports. According to Montgomery, sport ATVs are now the fastest growing segment of the American motorsports market.
The glory days of mountain bike sports, which took place in the1990's, are over, and not even celebrity owners of Cannondale's bicycles, such as Madonna and Jerry Seinfeld, can overcome the maturation of the global bicycle market.
Through June 30, 2001, Cannondale invested roughly $65 million in its motorsports division. The introduction of the motocross products has not been without problems. Like its first bicycles, according to Montgomery, the first motocross units the company shipped were “not perfect.” In fact, Cannondale suspended production of its highly-publicized MX400 motorcycle from October of 2000 into December of that year.
In motocross, Cannondale is also dealing with a new clientele, since the demographics of “dirt” bike riders are not as high as those of high performance bicycle riders. And motocross prices are high: a Cannondale ATV costs $12,495, whereas the Cannondale bicycles range in price from $600 to $5,000.
Nonetheless, the company is pursuing a marketing strategy in motocross similar to the one it has pursued in bicycles. A Cannondale team now travels the ATV circuit, and its motocross line has received wide - and, now, praiseworthy - exposure in sports magazines.
Last fiscal year, the pre-tax earnings of the company's bicycle division increased by 20.3 percent over the preceding fiscal year. Q3 fiscal year sales of motorbikes amounted to approximately $9 million dollars, although the motocross division has yet to turn a profit. Overall, the company's sales fell by 9.64 percent in the last fiscal year from the preceding fiscal year.
If pushed on its domestic manufacturing, the company points to another made-in-the U.S.A. product, the Harley-Davidson motorcycle, whose sales this past fiscal year rose by 19 percent.
From a 52-week low of $2.02 on November 26, 2001, Cannondale stock reached a high of $4.60 on March 3, 2002. On June 11, the stock closed at $2.67, and the company's market capitalization stood at $21 million. It paid no dividend at the end of its last quarter, which was March 31.
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