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The Hockey Company

 


Address:
3500 Boulevard Maisonneuve West
Suite 800
Westmount, Quebec H3Z 3C1
Canada

Telephone: (514) 932-1118
Fax: (514) 932-6043


Statistics:
Public Company
Incorporated: 1991 as SLM International Inc.
Employees: 1,756
Sales: US$190.6 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: THCX
NAIC: 339920 Sporting and Athletic Goods Manufacturing; 421910 Sporting and Recreational Goods and Supplies Wholesalers; 315223 Men's and Boys' Cut and Sew Shirt (Except Work Shirt) Manufacturing (pt); 315299 All Other Cut and Sew Apparel Manufacturing (pt); 316219 Other Footwear Manufacturing


Company Perspectives:


The Hockey Company's strategy is based on superior product technology and brand leadership. The hockey equipment market is driven by new product innovation and the Company manages a portfolio of the world's leading brands--CCM, Koho, and Jofa--that market these new technologies. Each brand is focused on a different consumer segment and multiple channels of distribution. The strategy is intended to allow the Company to fully penetrate all viable hockey markets with products it develops, manufactures and markets. The Company believes it can achieve annual revenue growth at a higher rate than the expected growth of the world-wide hockey market.


Key Dates:


1976: Montreal businessman David Zunenshine enters the hockey industry through the acquisition of CG Knitting, a hockey jersey manufacturer.
1983: Company acquires the hockey assets of CCM Inc.
1988: Company enters the toy industry through the acquisition of Coleco Industries.
1991: Company incorporates and takes the name SLM International Inc.
1995: SLM files for Chapter 11 bankruptcy protection.
1997: Company emerges from bankruptcy protection and reorganizes.
1998: SLM acquires Sports Holdings Corp. and becomes the world's top producer of hockey merchandise.
1999: SLM is renamed The Hockey Company.


Company History:

The Hockey Company is the world's largest manufacturer of hockey equipment, producing and distributing hockey products such as hockey skates, sticks, uniforms and apparel, and protective gear. The company also makes inline skates and holds licensing agreements to make and market apparel and other products with the National Hockey League (NHL) logo. In addition to its flagship brand CCM, The Hockey Company sells merchandise under the brand names Canadien, Heaton, Jofa, Koho, and Titan. The Hockey Company was formerly known as SLM International Inc. and emerged from Chapter 11 in 1997.

Falling into Hockey: Mid-1970s

What eventually became The Hockey Company began as somewhat of a chance occurrence. The Zunenshine family was well known in Montreal for its commercial real estate business Belcourt Inc., which it began in the 1950s. In 1976 an interest in diversification and a tax-loss credit prompted chairman David Zunenshine to purchase GC Knitting, a manufacturer of polyester hockey jerseys. Though Zunenshine had no intention of expanding into sporting goods, GC Knitting was performing strongly, and thus Zunenshine decided to keep the business and make a go of it.

The Zunenshine family moved more decisively into the hockey realm in 1983 with the purchase of the hockey assets of CCM Inc., which had been making ice hockey skates since 1905. CCM commanded strong brand awareness, but the company fell into bankruptcy in the early 1980s. With the CCM purchase the Zunenshines also acquired the Tacks brand of skates. Also in the early 1980s the Zunenshines bought Sandow Sports Knit, which provided them with the license to make and market NHL jerseys, and in 1985 the Zunenshines purchased St. Lawrence Manufacturing Canada Inc., the primary supplier of ice skate blades for CCM. St. Lawrence, like CCM, faced financial troubles.

Using the initials of St. Lawrence, the Zunenshines called their company SLM Canada and worked to revitalize the ailing companies, financing their efforts with real estate resources. The purchase of St. Lawrence gave the Zunenshine family additional manufacturing capabilities and more plastic injection molding capacity than the company required. To take advantage of the resources, the Zunenshines bought equipment specifically designed to manufacture toboggans and plastic sleds and imported the gear from Scandinavia.

Foray into Toys Sparks Growth in the Late 1980s and Early 1990s

One problem SLM faced was that its business was largely seasonal, with most of the company's products geared toward winter sports and activities. As a result, the company's factories were relatively unproductive during the summer months. To tackle the dilemma, the Zunenshines acquired Coleco Industries, a toy manufacturer, in 1988 when Coleco went bankrupt. Coleco was known for producing Cabbage Patch dolls but also made swimming pools and other plastic goods for children. The Zunenshines hoped the purchase would round out SLM and boost productivity throughout the year.

The Zunenshines expanded further into the toy market in 1990 when they acquired another financially troubled company--Buddy L Corp., a 70-year-old manufacturer of steel and plastic toy cars and trucks based in the United States. The method of growth through the acquisition of bankrupt companies caught up with the Zunenshines, however, and the family found itself struggling to keep SLM afloat. To help manage the financially beleaguered network of companies, the Zunenshines hired Earl Takefman to head SLM's toy division in 1990. Takefman was a Montreal entrepreneur who had recently resigned his post as president of Charan Industries Inc., a toy, gift, and sporting goods company that had gone from success to disaster. Takefman, who was named co-CEO with Howard Zunenshine, founder David Zunenshine's son, vowed not to repeat past mistakes and set about turning SLM around.

The year 1990 was not a good one financially for SLM. The toy division, still in the midst of reorganization, posted an operating loss of US$2.2 million, and the company overall reported a net loss of US$3.2 million. The toy segment quickly began to improve sales, however, when the company obtained the licensing rights to reproduce such popular characters as the Little Mermaid, Big Bird, and Cookie Monster on toy swimming pools. The industrywide rise in toy sales in 1991 also helped SLM, and the company reported net income of US$6.3 million for fiscal 1991.

Motivated by the rapid turnaround, SLM sought additional avenues for growth, and in November 1991 the company went public, adopted the new name SLM International Inc., and set up headquarters in New York. By February 1992 the company's stock had increased 71 percent, and SLM was one of the fastest-growing toy companies in the United States. Industry analysts gave SLM glowing reviews and projected strong growth. Takefman believed the toy division was the key to SLM's success and anticipated further growth and expansion, particularly in overseas markets.

By the early 1990s the hockey division, despite steady performance, was no longer the mainstay of SLM; in fact, hockey equipment accounted for less than 25 percent of sales in 1991. Expansion continued to drive the company, and in 1992 SLM purchased Kevin Sports Toys International Inc., the maker of the Wayne Gretzky NHL hockey game; Norca Industries Inc., a plastic toy manufacturer of such products as swimming pools, sleds, and sandboxes; and Innova-Dex Sports Inc. of Montreal, a bicycle helmet manufacturer. SLM also sold fitness equipment through its SLM Fitness division. Products included the Superstep aerobic portable platform, Heavy Hands exercise weights, and Gravity Edge exercise unit, which were marketed through television infomercials featuring sports celebrities, including Olympian Bruce Jenner.

Innovation also drove SLM, and the company planned to introduce a number of new products, including the Voice Command Vehicle, a voice-activated toy truck, and a line of inline skates featuring 'Pump' air-bladder technology licensed from Reebok International Ltd. Another pioneering product SLM readied for the retail market brought the company much publicity--in early 1993 SLM announced it would introduce the Super Charger, a recharger designed to renew the life of disposable alkaline batteries. While battery manufacturers, particularly market leader Duracell International, maintained that alkaline batteries were not designed to be recharged and that attempting to do so was potentially dangerous, SLM stated that its recharger had been tested rigorously and was safe. Though SLM hoped the recharger would significantly boost sales, the company contended that its future was not contingent upon the recharger's success. 'We're not a battery-charger company. We're a toy company,' Earl Takefman said in the Asian Wall Street Journal. 'We're not going to sink or swim on this product.'

Success certainly seemed to have hit SLM. Revenues for fiscal 1992 reached a record US$231.4 million, a 41 percent increase over 1991, and profits rose from US$6.2 million in 1991 to US$16.3 million. Toy sales alone grew 26 percent, to US$118.1 million, and SLM's market share in the toy industry was on the rise. In 1992 SLM's trucks powered past the Tonka brand to capture 27 percent of the market. SLM ranked second in the wheeled preschool toy market and was selected by retail giant Toys 'R' Us as 'vendor of the year' for three years running. SLM's sporting goods segment also performed strongly, with sales up 61 percent in 1992 compared to 1991 sales.

SLM appeared unstoppable as revenues and profits continued to climb. Since its IPO in late 1991, SLM had posted eight successive quarters of record revenues and earnings. The company continued to grow through acquisitions, and in 1994 SLM bought #1 Apparel Inc., a manufacturer of licensed sports apparel, particularly hats and outerwear. SLM had plans to expand its hockey and toy operations and penetrate the European market. Howard Zunenshine, who headed SLM's sporting goods division, explained SLM's strategy in Sporting Goods Business and said, 'Our theory is it's easier to buy than build. ... If you have cash in your pocket and you can buy shelf space, you're in. That's the way to go.'

Things Fall Apart: Mid-1990s

SLM's success seemed to fade as quickly as it had appeared, and by late 1994 the company appeared to be in financial straits. The Zunenshine family's Belcourt Inc. went bankrupt in 1994, and in August Earl Takefman left the company, leaving with a severance package worth $1.5 million. SLM, of which the Zunenshines owned 42 percent in late 1994, reported a loss of US$52 million for the third quarter ended October 1, 1994. The company's stock, which had reached a high of $30 in late 1993, plunged to less than $3 a share by late 1994. At the beginning of October SLM reported a deficit in working capital of US$5.8 million, compared to a surplus of $84 million just a year earlier. The company also disclosed that it had breached its loan agreements with its lenders.

Howard Zunenshine, who became sole CEO after Takefman's departure, attributed many of the company's problems to the toy division, which he said had 'run amok.' The expense of producing infomercials for toys and fitness equipment proved costly and caused SLM's selling and general and administrative expenses to nearly double in the first nine months of 1994. The Buddy L Super Charger did not perform to the company's expectations, and after continued controversy and a negative review by Consumer Reports magazine, the product was pulled from the market. Despite SLM's difficulties, Howard Zunenshine remained optimistic about the company's future. The sporting goods division managed to perform well during the first nine months of 1994, with sales increasing 44 percent, and new management was placed in the toy division. Zunenshine told the Gazette (Montreal), 'We're not in dire straits by any stretch of the imagination. ... We've had better years, ... but we're optimistic.'

Optimistic or not, the Buddy L toy division filed for Chapter 11 bankruptcy protection in early 1995, and SLM's lenders attempted to force four SLM units--Toy Factory Inc., Consumer InfoMarketing Inc., Maska U.S. Inc., and #1 Apparel Inc.--into bankruptcy. SLM's shares were then delisted from the NASDAQ exchange in May because they failed to meet NASDAQ's minimum net worth requirement. For fiscal 1994 SLM reported a net loss of US$112 million on sales of $181 million, and the following year the company's net loss was $77.5 million on sales of $161 million.

In July 1995 SLM exited the toy industry when it sold its Buddy L toy division to Empire of Carolina, Inc., for US$3.75 million and 757,000 shares of stock. The company also sold its fitness equipment business to a group consisting of former SLM Fitness management. SLM planned to refocus its efforts on its flagship hockey equipment division. In October SLM International and its subsidiaries filed for Chapter 11, noting debt of US$184.6 million. Though operations continued, SLM's status as a leader in the hockey realm was in question. CCM's exclusive contract with the NHL to produce apparel ended in 1995 when the NHL formed licensing agreements with other companies, beginning with Starter Corp., which in about half a year gained more than half of the market share in NHL jerseys.

Rebuilding and Return to Hockey: Late 1990s

In April 1997 SLM emerged from bankruptcy with new management in place and a reorganization plan. New York-based investment bank Wellspring Associates LLC, which specialized in buying financially troubled companies, became the primary shareholder of SLM, and the Zunenshine family was no longer part of the company. The company's new common stock began trading under the symbol 'THCX' on the OTC Bulletin Board. The company's new CEO, drawn out of retirement by SLM's lenders, was Gerald Wasserman, who had been the president and CEO of SLM competitor Canstar Sports Inc. and a key player in Canstar's turnaround in the early 1990s. Canstar, acquired by NIKE, Inc. in 1995 and renamed Bauer Inc., was headed by a former colleague of Wasserman's.

Wasserman planned to take advantage of the booming hockey industry, estimated to be worth more than US$600 million in the United States alone, and leverage the strength of the CCM brand. Wasserman closed SLM's New York offices and moved the headquarters to Montreal. Operations were consolidated, several facilities were closed, and subsidiary Mitchel & King Skates Limited was sold. His executive team included several people Wasserman managed to lure away from Bauer. Wasserman intended to invest more in research and development, believing that innovation and technology were key components of success in the hockey industry. Though the new team felt confident in SLM's future and possibilities, it faced many challenges, particularly from Bauer. Of the hockey skates and hockey gear sold in North America in the mid-1990s, SLM and Bauer accounted for 95 percent. And though 40 percent of NHL players used CCM's Tacks brand of skates, the Bauer brand was stronger among the general public, commanding twice the market share.

In 1998 SLM became the largest hockey company in the world when it acquired Montreal-based Sports Holding Corp., a manufacturer of hockey equipment. Sports Holding's brands included Finnish Koho, Titan, Swedish Jofa, Canadien, and Heaton. The acquisition significantly boosted SLM's presence in Europe, as Sports Holding was the leading hockey equipment company in Central Europe and Scandinavia. In addition, the company was a market leader in hockey sticks and protective gear, sold under the Jofa and Koho brands. The combined company was estimated to have sales of about US$200 million a year.

In early 1999 SLM changed its name to The Hockey Company. Wasserman commented on the new name in a prepared statement and said, 'Our new name reflects the leadership position that our company enjoys in the hockey industry. The Hockey Company possesses the most widely recognized hockey brands in both Europe and North America, as well as product lines and geographic strengths that are highly complementary.' The Hockey Company secured a 'Center Ice' licensing agreement with the NHL which permitted the company to make and market apparel with NHL logos. The company also made protective equipment under license from the NHL. The Hockey Company's share of the NHL licensed apparel trade increased in 1999 as well, as Starter Corp. and NIKE both withdrew from the replica jersey industry.

Sales in fiscal 1999 grew 4.1 percent compared to 1998 figures to reach US$190.6 million. Revenues were supported by an increase in apparel sales, in the selling price of goaltender equipment, and in hockey stick sales. The Hockey Company reported a net loss of US$1.8 million, slightly down from a net loss of US$2.0 million in 1998. The ultimate fate of The Hockey Company was unknown, and the company had certainly experienced its share of ups and downs. With the popularity of hockey still growing, an experienced and knowledgeable team managing the company, and a host of new and innovative products readied for launch, the odds seemed to be in The Hockey Company's favor.

Principal Subsidiaries: Maska U.S., Inc.; Sport Maska Inc.; SLM Trademark Acquisition Corp.; SLM Trademark Acquisition Canada Corporation; Sport Maska Europe S.A.R.L.; Maska H.K. Limited; Sports Holding Corp.; KHF Finland Oy; KHF Sports Oy; WAP Holding Inc.; JOFA Holding AB; JOFA AB; JOFA Norge A/S; J.W. Verwaltungsgesellscahft mbH; Solte Kunstoffverarbeltungsgesellschaft mbH; 2867923 Canada Inc.

Principal Competitors: NIKE, Inc.; Rawlings Sporting Goods Company, Inc.; Riddell Sports Inc.





Further Reading:


Bernstein, Andy, 'Starter, Others Cutting into NHL Pie As CCM Sorts Out Troubles,' Sporting Goods Business, January 1, 1996, p. 28.
Hadekel, Peter, 'After Belcourt Bankruptcy, Zunenshines Take Beating in Toy Department,' Gazette (Montreal), November 29, 1994, p. D1.
Ingram, Mathew, 'U.S. Insurers Seek SLM Bankruptcy,' Globe and Mail, March 7, 1995, p. B15.
Leitch, Carolyn, 'SLM Hopes to Rebuild CCM Line,' The Globe and Mail, January 9, 1997, p. B8.
Levingston, Steven E., 'SLM Sparks Controversy As It Launches Product,' Asian Wall Street Journal, February 8, 1993, p. 10.
McEvoy, Christopher, 'SLM International,' Sporting Goods Business, February 1, 1994, p. 76.
Millan, Luis, 'Ice Follies,' Canadian Business, June 1, 1997, p. 126.
Morris, Kathleen, 'SLM International: A Buy in Toyland,' FW, July 21, 1992, p. 16.
Reguly, Eric, 'Toymaker SLM Playing with Big Boys,' Financial Post, June 26, 1993, p. 14.
Shalom, Francois, 'CCM Is Back in the Game,' Gazette (Montreal), February 17, 1997, p. C12.
------, 'SLM Laces Up Merger,' Gazette (Montreal), October 9, 1998, p. E1.
------, 'SLM Subsidiary Upbeat Despite Parent Firm's Problems,' Gazette (Montreal), October 25, 1995, p. D8.
Strauss, Gary, 'SLM Skating Toward Big Growth,' USA Today, February 25, 1992, p. B3.
Toomey, Craig, 'Fun and Games,' Gazette (Montreal), March 30, 1992, p. B8.
Weinberg, Neil, 'One Thing Led to Another,' Forbes, October 25, 1993, p. 206.

Source: International Directory of Company Histories, Vol. 34. St. James Press, 2000.




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