Snow/skate mogul adds European strength to his businesses.

Richard Novak, owner of Santa Cruz Snowboards, NHS, and several skateboard companies, has bought Switzerland-based DNR Sportsystem from Marker (the 80-percent owner) and from Gregor Furrer and Lucio Roffi-its two other shareholders-for an undisclosed amount of money.

According to a Form 10-Q filed by Marker with the Securities and Exchange Commision on November 20, 1998, the company sold its shares of DNR for “nominal consideration” and will eliminate all outstanding intercompany balances in relation to its snowboarding business.

The purchase is sort of a homecoming for the company. Novak originally founded DNR along with Roffi and Titus Dittman in 1989, as a European licencee to handle distribution, marketing, and development for Santa Cruz Snowboards. It also took on a similar role for Sims Snowboards in 1991.

Novak and Dittman both sold their DNR shares in 1995. In December of that year, Marker purchased 25 percent of DNR for 5.4-million dollars, and also announced the construction of a new snowboard factory in Salt Lake City, Utah. Marker later purchased another 55 percent of DNR for approximately twenty-million dollars. The move was Marker’s entry into the snowboard market at a time when the industry was tetering on a major consolidation.

At the time of the Marker purchase, DNR was involved in the marketing and distribution of both Sims and Santa Cruz snowboards in Europe, and was working with both brands to develop and manufacture their lines. DNR had sales of 44-million dollars that year.

In a highly publicized lawsuit, Sims terminated its contract with DNR in October of 1996 (see SNOWboarding Business, Volume 8, Number 3), which ultimately led to a huge loss in business revenues and lawsuit expenses for DNR and Marker. Insiders say the lawsuit also dealt a huge financial blow to Sims, from which that company is only now starting to recover.

Novak’s Gain

With the repurchase by Novak, DNR will now focus solely on designing, manufacturing, and distributing Santa Cruz Snowboards. In the recent past these duties were split with producing and selling the Marker-brand snowboard equipment as well. According to Novak, DNR will work in conjunction with NHS on these tasks. NHS will oversee the overall direction and North American sales of the brand.

Novak says having the DNR offices in Switzerland will boost the Santa Cruz name across that continent. “We’ll have a presence in Europe and will have Europeans dealing with Europeans.”

In addition to handling the distribution of the brand, the DNR staff will oversee the R&D and manufacturing of the Santa Cruz product at the Volkl factory in Germany. DNR Vice President Shaw Kaake will be in charge of development and engineering.

Roffi, who had been a founder, chairman, and CEO of DNR, left the company almost a year ago and was replaced by Claudia Jandolo, who will continue as the president under the new ownership.

Marker’s Refocus

While Novak gains direct control over the Santa Cruz brand, Marker management hopes that by selling its snowboarding business, it will be able to turn around its recent slide.

Marker’s snowboard manufacturing operations ceased on July 30, 1998, and on September 10, 1998, the Marker Board of Directors authorized the disposition of the entire snowboard operation of the company.

“While the losses from our discontinued snowboard operations are significant,” says Marker President and CEO Peter Weaver, “we are now able to focus on our core business, and intend to return it to profitability as quickly as possible.

“We are confident in our ability to maintain our position in the Alpine ski-binding business, and we plan to concentrate all our resources toward this effort.”

But, Weaver says, the company will maintain some presence in the snowboarding world. “We have inventory, we’re selling products, and we’ll continue to service those products ffor as long as we need to,” he adds. Weaver also says the company has developed another, better step-in snowboard-binding system, but the company won’t show any products or new lines at the upcoming trade shows.

How bad have Marker’s recent financials been? For the six months ended September 30, 1998, the company recorded a loss from discontinued operations of approximately 26.3-million dollars. This loss is based upon management’s current estimates regarding the ultimate realization of assets and settlement of liabilities on disposal of the snowboard operations. However, actual results could differ from those estimates.

Indeed, Marker’s financial woes are still significant. The company’s net loss for the six months ended September 30, 1998 was 32.2-million dollars, compared to a net loss of 6.1-million dollars for the corresponding period of the prior fiscal year. The increase in net loss for the period compared to last year is primarily the result of the company’s discontinued snowboard operations.

-John Stouffer