Riddell Sports Inc.

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Riddell Sports Inc.

900 Third Avenue
New York, New York 10022
U.S.A.
(212) 826-4300
Fax: (212) 826-5006

Public Company
Incorporated: 1927
Employees: 613
Sales: $72.1 million (1996)
Stock Exchanges: NASDAQ
SICs: 3949 Sporting & Athletic Goods, Not Elsewhere Classified; 5091 Sporting & Recreational Goods & Supplies; 6794 Patent Owners & Lessors; 7999 Amusement & Recreation Services, Not Elsewhere Classified

Riddell Sports Inc. is the world’s leading manufacturer of football helmets and the world’s leading reconditioner of football helmets, shoulder pads, and other sports protective equipment. It also markets collectible products, mainly helmets, and licenses its Riddell and MacGregor trademarks to other companies, primarily for use on athletic footwear and apparel. In 1997 it purchased a company supplying uniforms and operating facilities for cheerleaders and dance teams.

Making Helmets and Shoes, 1927-79

The company was founded in 1927 by John T. Riddell, coach of the Evanston, Illinois high school football team. Riddell designed the first screw-on removable cleat in 1922 so that his players’ footgear would not have to be refitted each time field conditions called for a change in the length of the cleats. He then found a company that would make football shoes with this cleat, but in 1927 he quit teaching and coaching to open his own company. Based in Chicago, Riddell, Inc. also developed and manufactured the first soft-spike baseball shoe. In 1939 Riddell perfected the first molded basketball but had to discontinue making them during World War II because of difficulty in getting the right materials; it never resumed making this product.

John Riddell’s most lasting development may have been the plastic-shell football helmet, which he devised in 1939. This was a welcome replacement for the time-honored leather ones with cloth or felt liners that were stiff, sweat-fouled, hot in autumn, and cold in winter. Riddell then invented the web sling suspension that provides a pocket of air between the player’s head and the hard outer shell of the helmet. This was adopted by the military during World War II and remained in use. Gerry Morgan, who later became the firm’s chairman, told the Chicago Tribune in 1976, “Every GI who went through training wore one, and we gave it [the patent] to the government for what I regret was a ridiculously low fee.” Riddell also was responsible for the chin strap and the first low-cut football shoe, both in 1940.

Riddell died in 1945. By 1950 his company had perfected the one-piece helmet. “We finally got the right material, a compound of rubber and plastic that would take all the stress,” Morgan said. It also “was tough enough to withstand temperature changes.” Morgan went on to call the human head “the damnedest thing to fit. It comes in all shapes and sizes—egg heads, square heads, flat heads, and lopsided heads. The head isn’t round, it’s elongated, especially larger heads.”

Riddell began selling helmets to professional football teams shortly after World War II and by 1949 had the largest share of the pro market. Morgan traveled with the pro teams for several seasons, designing, improvising, and adjusting new equipment ideas. One of these was a bar attached to the helmet of Cleveland Browns quarterback Otto Graham to protect his face. This eventually led to the double bar, the face mask, and other protective devices. Another idea was less successful: a two-way radio so that Browns coach Paul Brown could communicate with Graham while the quarterback was on the field. Riddell installed a citizen’s-band radio into a helmet, but when the Browns tried to use it, two women were talking on the frequency. Eventually the club realized that if the coach could send in a play on the radio, the opponent could get a receiver and listen in, too.

By 1975 Riddell was unique among sporting equipment manufacturers in making only two products: helmets and shoes. It earned close to $1 million that year on revenues of about $9.9 million. By the mid-1970s the company was furnishing all National Football League teams except the New England Patriots with helmets. The company’s 200 employees produced 250,000 helmets in 1975, at prices ranging from $20 to $40. This was double the previous year’s output because of recent federal legislation setting standards for helmet durability and reliability. Riddell also was making baseball helmets and all-leather shoes for both football and baseball.

Riddell was sold to Wynn’s International Inc., a California-based conglomerate, in 1975. The following year a number of new products were introduced, including several models of casual and training shoes for jogging and general recreation, an expanded line of popular-priced football shoes, special-purpose footwear for Softball and soccer, a new vinyl-cleat football shoe for the youth market, and lighter weight football face masks. Net sales reached $15.1 million in 1979, when Riddell was also selling warmup suits and T-shirts to retailers. The company was having trouble finding skilled shoemakers and meeting competition in the shoe business, however, so it dropped all footwear manufacturing in 1979. The following year Wynn’s sold Riddell and another subsidiary, Bell Helmets Inc., to an undisclosed party for $10.5 million in cash and notes and the assumption of $443,000 in debt.

Aside from the unprofitable expansion of its shoe business, Riddell’s chief problem in the late 1970s was the product liability suits that had caused its insurance premiums to rise tenfold in 1976, following a $5.3 million judgment against the company in the case of a youth paralyzed by a broken neck. Morgan blamed high school coaches who taught their players to use the helmet to block or tackle an opponent, thereby risking trauma to the neck. In 1977 sources for the sporting goods industry estimated a total of $150 million in lawsuits pending against the seven remaining U.S. helmet manufacturers.

Frank Gordon, the company’s president, told the Chicago Tribune in 1977 that Riddell had stopped reconditioning helmets because of the liability issue. “It used to be a big part of our business,” he said, “but we have found that it’s hard to tell when a plastic shell has been weakened, particularly if it’s over four years old.” Gordon, a lawyer, went to on say that the company was protecting itself by assembling a stable of experts— physicists, doctors, and people in biomechanics—ready to testify in court in support of the company’s contentions in defense of its helmets. Although dropping out of the reconditioning business itself, Riddell sold patented parts necessary for reconditioning and refurbishing its helmets to other reconditioning firms.

Broadened Line of Products, 1985-97

Riddell still was the nation’s largest manufacturer of football helmets at the beginning of 1985, when the privately held company was sold to MacGregor Sporting Goods Inc. for $5.5 million and the assumption of about $700,000 in liabilities. This transaction infuriated Michael Blumenfeld, founder and chief executive of Dallas-based BSN Corp., who had sought the company himself. MacGregor broadened Riddell’s football product lines in such areas as shoulder pads, small protective pads, and hand and arm pads. Virtually all of its products were being manufactured at the Chicago facility.

MacGregor retained Riddell for only three years. In 1988 it sold the company and Equilink Licensing Group (which was licensing the MacGregor trademark) for $38.2 million in cash and notes to a group led by the Nederlander family, which renamed the company Riddell Sports and moved its executive offices to New York City. Robert Nederlander became chief executive officer. MacGregor received a 25.5 percent stake in this group and retained the right to license the Riddell name for protective products other than those used for football. Riddell had annual sales of about $14 million at this time.

Riddell now held 60 percent of the National Football League helmet market, and one of its assets was the right to market helmets with the names of the league’s teams on them. In 1989 Riddell signed an agreement (renewed in 1994) with the NFL’s licensing arm, promising to make helmets, shoulder pads, and other gear available to the league’s teams for free if 90 percent of a team’s players used its helmets. Players who wore helmets made by other companies were required to conceal the logos of those companies. In 1991 it entered into a five-year exclusive licensing pact providing that the Riddell trademark would appear on the front center and chin strap of each company helmet worn by an NFL player.

The liability issue continued to drive up Riddell’s costs and, consequently, its helmet prices during the 1980s. The company, which had reentered the reconditioning business late in the decade, announced in December 1989 that it would no longer recondition or recertify helmets once they were ten years old because it said recent studies showed the helmet shell was no longer effective after this period. The change in policy worked hardship for the many high schools that could ill afford to resupply their players with new helmets at $90 apiece.

Riddell lost $1.2 million on net revenues of $21.3 million in 1989. The company had a net profit of $1.9 million the following year on net revenues of $30.4 million and $2.2 million in 1991 on net revenues of $35.5 million, of which football helmet sales accounted for 47 percent. It became a public company in 1991, when one third of the shares of common stock were sold at $8 a share in an offering that netted the company about $14.9 million. Three months later, as part of a transaction valued at $19 million, Riddell transferred to BSN about 27 percent of its stock to acquire BSN’s Protective Equipment Division, whose All American Sports Co. was the nation’s leading reconditioner of used football helmets. This division also included Maxpro Sports Inc., manufacturer of helmets and shoulder pads.

Riddell introduced ice hockey shoulder pads to its product line in 1992. It signed Chicago Black Hawk player Jocelyn Lemieux to redesign and promote these pads, which Lemieux redesigned to fit his specifications. “I’ve had them add a bubble-like foam all over rather than flat padding,” he told a Chicago Tribune sportswriter in 1993. “Their pads were too big and bulky at first,” Lemieux added, “like football pads. I have tried to make it more comfortable while still keeping the protection.” Lemieux indicated that vanity was also a consideration. “The first thing a hockey player does when he puts on new equipment is run to the bathroom and look in the mirror to see how he looks. No one wants to see himself real wide and bulky with pads.”

Riddell’s profits fell in 1992, and the following year it lost $5.7 million on revenue volume that dropped to $48.8 million from $56.4 million the previous year. Blumenfeld, as chief of BSN’s successor, Sport Supply Group Inc., continued his longstanding pursuit of the company, offering to buy it for Sport Supply stock valued at $14.5 million and the assumption of Riddell’s $23 million in revolving bank debt. A harsh critic of the company’s management, Blumenfeld earlier had proposed a management takeover, citing Riddell’s poor earnings, declining stock price, and alleged lack of strategic direction and poor execution of its operating plan. Riddell common stock was trading at $2.50 a share in 1993, compared with a high of $16 in September 1991. His bid was rejected, however, by Nederlander and his partners, who continued to hold the largest block of the company’s stock.

Riddell lost almost as much money—$4.9 million—in 1994 as in 1993, even though its revenues rose to $55.4 million. The following year it earned a modest $470,534 after taxes on net revenues of $67 million. In 1996 the company had net income of $2.8 million on net revenues of $72.4 million.

Riddell Sports in 1996-97

In 1996 Riddell Sports’ Riddell, Inc. subsidiary was manufacturing helmets at its Chicago plant and was purchasing shoulder pads from other sources for sale to institutional and retail customers. Helmets accounted for 21 percent and shoulder pads for nine percent of the parent company’s revenues in 1996. Riddell was also selling accessory pads, including thigh, hip, rib, and knee pads. In addition, this subsidiary began selling baseballs and softballs, protective baseball equipment, and certain other baseball and softball equipment for high school and college players in 1996. Later in the year it added practicewear such as T-shirts, shorts, fleece warmups, and other basic athletic clothing to its product line.

All American Sports was selling reconditioning services and new athletic products to schools and other institutions. It was the leading reconditioner of football helmets, shoulder pads, and related equipment. This subsidiary also was reconditioning equipment for other sports, including baseball and lacrosse helmets, catchers’ masks, and gloves. Reconditioning accounted for 30 percent of the parent company’s revenues in 1996.

Riddell Sports’ fastest growing line in 1996 consisted of sports collectible products, primarily authentic and replica football helmets of professional and college teams, offered in miniature and full-size models. The company also had license agreements for other collectible products with organizations such as the National Hockey League, Major League Baseball, and Lucas-film, Ltd. With respect to the latter, it was planning to sell half-scale Star Wars miniature collectibles based on Darth Vader and other characters. Sales of sports collectibles accounted for 29 percent of the parent company’s revenues in 1996.

Through its licensing subsidiaries, Riddell Sports had granted certain third parties the right to use the Riddell and MacGregor trademarks in connection with the sale of athletic shoes, clothing, and other products. The company owned half the stock of MacMark Corp., which owned the MacGregor trademark. License income came to three percent of the parent company’s revenues in 1996.

Riddell got a boost in 1997, when San Francisco 49ers quarterback Steve Young switched to a Riddell helmet after suffering his third brain concussion in ten months. Eight out of ten NFL players already were wearing the heavily padded Riddell headgear. The debate over whether the league was doing enough to prevent serious head injuries in a game dominated by bigger and faster players than in the past had resulted in many rules changes in the past two years and also in a league committee on mild traumatic injuries.

Riddell extended its scope in May 1997 by agreeing to acquire Varsity Spirit Corp., a supplier of uniforms for cheerleaders, dance teams, and booster clubs. The company also operated cheerleader and dance team camps, clinics, and competitions. Riddell paid about $91 million for Varsity, which had net income of $5.2 million in 1996 on revenues of $88.4 million. Also in 1997, Riddell began marketing miniature baseball helmets bearing the logos of major league baseball teams.

In addition to its Chicago plant, the company had ten facilities for the reconditioning of athletic equipment, of which one was in Canada. It also maintained a screen-printing operation in Elk Grove, Illinois, that could customize its practicewear to bear almost any logo, team name, or other design that the customer requested. Except for the company-owned Chicago factory, all these facilities and its New York City executive offices were being leased. In May 1997 Nederlander owned 44 percent of Riddell’s stock personally and 10 percent as general partner of M.L.C. Partners Limited Partnership. Leonard Toboroff, a vice-president and director of the firm, held 17 percent. The company’s long-term debt was $31.1 million at the end of 1996.

Principal Subsidiaries

All American Sports Corporation; Equilink Licensing Corp.; Proacq Corp.; Raleigh Athletic Equipment Corporation; RHC Licensing Corp.; Ridmark Corporation; Riddell, Inc.; SharCo Corporation.