“Sure our credibility in the snowboard industry is shot. But people don’t know the real story. None of this should ever have happened,” says Tony Broughton, chief financial officer of Pacific International Enterprises (PIE), parent company of the France Group.

The story Broughton is referring to is the swirl of accusations associated with France Group’s October 8 Chapter Eleven filing–coming barely eight months after PIE took control of France Sport from Washington trash magnate Ty Ross.

The France Group assets are valued at 3.5-million dollars and include the France Sport factory in Goldendale, Washington; its in-house snowboard brand 24/7; the WakeTech wakeboard and Rift snowboard brands; and MicroSki, a brand of ski blades.

The PIE/France Sport deal called for PIE putting up 600,000 dollars (raised from equity and receivables) with Ross carrying a remaining 1.6-million dollars for five years. PIE also agreed to assume the accounts payable of the previous owners.

The truth behind the blame and denial surrounding the Chapter Eleven filing can only be worked out by the courts with the benefit of full documentation.

But even after the Chapter Eleven is resolved, many of those once involved with the France Group say significant damage has been done. In fact, as of early November relations between most of the players involved have broken down to a point that accusations of criminal intent are being made by former employees.

What HappenedThe eight-month journey from purchase to Chapter Eleven is hard to follow, but almost everyone points to the age-old problem faced by failing business everywhere: lack of working capital.

CFO Broughton readily accepts lack of capital is to blame, but places responsibility squarely on the shoulders of Ty Ross.

“Two- or three-hundred-thousand dollars and we would have covered all our production commitments,” says Broughton. “We filed Chapter Eleven partially because we had no cash, but equally because it meant Ty Ross no longer had the ability to undermine all our attempts to secure financing.

“Unlike the Murrays previous owners of Wake Tech, Ty Ross failed to file the USC1 documentation that would secure him as primary creditor,” asserts Broughton. “But even as the secondary creditor, he refused to sign the subordination clause necessary for anyone who was going to provide outside financing. We’ve negotiated a million-dollar injection so we can pay our suppliers and get back to work. This has been in the works for some time, but without the Chapter Eleven, Ty’s refusal to sign the subordination clause made it impossible.”

On November 10 PIE announced a million-dollar credit line had been secured with ALCO Financing.

“He also took every step he could to make us look bad,” claims Broughton. “He posted a rent lien on a building where payment had been agreed in the original sale purchase. We sent him a check to make one of our payments. First he refused it, then he denied receiving it. He has no legal position, but his lawyers are attempting to block whatever we do.

“With no finance we always had to pay suppliers in advance so received the least favorable terms and paid premium prices on small shipments of materials,” continues Broughton.

PIE CEO Binks Gravel confirms what his CFO says, but is more conciliatory. “Ty Ross is a successful businessman and has acted because he thought he wasn’t getting paid. But we had financing ready on two occasions and he would have been paid off. If they lose out because they forced us into bankruptcy protection, that’s their responsibility and they must live with the actions they took.”

Ty Ross did not respond to the numerous attempts to contact him for this story.

The Situation In-HouseTwo members of the France Group senior staff–Marketg Director Jim Frazier and Production Manager Mike Plunkett–have quit in the wake of the Chapter Eleven filing.

Plunkett, a 30-year skate and snowboard manufacturing veteran who moved from California to Goldendale to work for the France Group, is openly bitter about his experiences.

He goes so far as to accuse Gravel and Broughton of being dishonest. “They are not ethical people. These guys should be in jail,” says Plunkett of his former employers. “They made promises about getting loans from the state they never even applied for.”

Although perhaps not the exact loans Plunkett is referring to, the France Group did receive a state loan and was given a 300,000-dollar float loan to make part of their down payment, backed by an irreversible LC says Tom Seiffert, who directs business development for Klickitat County. Gravel maintains negotiations for long-term state development financing for around three-million dollars are still ongoing.

“They even misrepresented the level of payables on the bankruptcy petition,” says Plunkett. “Their claims of a capacity of almost 300,000 boards per year ignores just how many of the presses need repair.”

Broughton says the only reason so many of the machines are dysfunctional is because of the lack of cash needed for minor parts.

Plunkett says he quit even though he’s owed 40,0000 dollars in back pay. “The disillusionment started when I realized the suppliers I had to deal with were owed 800,000 dollars, and there was no intention of paying them. I will not lie to suppliers. I told several simply not to ship unless there was a signed purchase order from me.”

Gravel responds to these statements by saying, “We are a public company and everything is scrutinized. I have no motivation to do anything illegal. But I don’t understand Mike Plunkett. We agreed to pay him a ton of money and made it clear our financing was not in place, and that some areas of the business were pretty sketchy. We advised him not to buy a house until everything was settled, but he went ahead. I think Mike is better at building boards than at administration.

“The finance situation meant he was facing supply problems every day, whereas at Variflex Plunkett’s previous employer, I guess they had as much cash as they needed. No one asked him to lie to suppliers. He had complete autonomy in purchasing. He just didn’t do well in a pressure situation. Yes, we owe him some money, but he was paid 60,000 dollars for 21 weeks of work. That’s about ten times what I made this year.”

Gravel adds that because his company never had credit for materials, almost all of the supplier bills are from the days of Ross’ ownership. “We were never able to buy enough materials to run all the machines,” he says. “Why would we spend money we didn’t have on minor items like air bladders or heat blankets for machines we didn’t need?”

However, a few eyebrows have been raised by France Group’s overheads. For example, Mike Plunkett’s promised salary of around 150,000 dollars is way above industry norms and is hard to justify in a cash-tight business. Heelside’s Kirk Zack was also approached to work at France Sport and reports similar salary offers. “I simply didn’t see how they could do it, so I declined,” he says.

The Impact On GoldendaleThe Chapter Eleven has impacted the economies of Goldendale and Klickitat county. “The entire town and county was excited when PIE came in promising year-round manufacturing,” says Seiffert. “The forestry industry is about played out here so the 47 jobs for factory workers were significant to the community. I believe a number of local retailers and businesses are owed money by the France Group. I still hope the situation can be turned around.”

But Gravel is not especially complementary about Goldendale and even wonders if he wants to continue doing business there. He says from the start local businesses, knowing of the company’s cash situation, far from extending credit, demanded cash for every purchase. He also says the local work force was less than reliable.

The UpshotThe upshot is the last remaining board-specific public company has gone under–at least for the moment. Some industry insiders say this is the final proof that slim margins, incredible marketing requirements, and the necessity of paying for materials six months in advance are simply not conducive toward the smooth cash-flow and reporting requirements of a public company. However, Broughton remains undaunted.

“We knew what all the problems were,” he says. “That’s why making wakeboards and skateboards to give us year-round production and income was so important. I believe our plans were sound and that if we could just put this behind us and get the financing to get back on our feet, the venture can still be a success.”

Sidebar

In The Blast Radius

Who was affected by the France Group’s Chapter Eleven?

In the way physicists often rely on the effects of a force on its surroundings to establish its existence, so fallout from the mess is easier to assess than exact causes.

The France Group bankruptcy protection filing lists around 800,000 dollars of payables due to suppliers. For example, Vince Miller’s design company Creative Edge is owed about 50,000 dollars.

“I doubt I have a five-percent chance of ever seeing a dime,” he says. “I used to be a supplier for Ty Ross, so when PIE took over management I continued. In fact, almost all the debt I’m owed is from the August 1998 to January 1999 period, when PIE was running the plant under Ross’ ownership.

“But when they didn’t pay it was the final straw,” continues Miller. “Coming off a 1997 were I lost around 150,000 dollars due to other snowboard companies failing, I had to think about my employees. So I sold my entire business to the Yoshida Group.”

Miller is still currently supplying the France Sport factory, but only materials for boards being made for Brunswick–which have been paid for in advance.

Bill Walton, president of both BW Woodcores and Snowtech, currently has independent legal actions against Ty Ross, France Sport, and the France Group to also recover around 50,000 dollars owed from the same period.

Winterstick moved its orders to France Sport after a disagreement with A-Sport over quality-control supervision, says Sales Vice President Steve Reinheir. These orders were backed by a letter of credit for 60,000 dollars for 474 advance-order boards and a further 400,000-dollar LC for the remaining production for this season.

Once the Chapter Eleven had been filed, Reinheir spent the next month in Goldendale, personally supervising the delivery of materials, building, packing, and shipping the boards for the smaller LC.

The large LC was then shifted back to A-Sport, which agreed to Winterstick’s terms and guaranteed delivery by November 15. This was possible as Winterstick already had most of the molds and materials.

Another OEM client, L.L.Bean, was also relatively lucky. “We received no product and won’t be getting any from France Sport. We closed the books on France Sport on November 2,” says Wintersport Product Developer Sheldon Perkins.

L.L.Bean had ordered 1,000 boards. France Sport, under the ownership of Ty Ross, delivered last season’s order, so Perkins met with the new PIE management and signed a purchase order in March ’99 with terms of net 30.

“In April, fearing problems, we offered to supply materials, but they declined, maintaining everything was on track,” says Perkins. “We went ahead and ordered graphics especially complementary about Goldendale and even wonders if he wants to continue doing business there. He says from the start local businesses, knowing of the company’s cash situation, far from extending credit, demanded cash for every purchase. He also says the local work force was less than reliable.

The UpshotThe upshot is the last remaining board-specific public company has gone under–at least for the moment. Some industry insiders say this is the final proof that slim margins, incredible marketing requirements, and the necessity of paying for materials six months in advance are simply not conducive toward the smooth cash-flow and reporting requirements of a public company. However, Broughton remains undaunted.

“We knew what all the problems were,” he says. “That’s why making wakeboards and skateboards to give us year-round production and income was so important. I believe our plans were sound and that if we could just put this behind us and get the financing to get back on our feet, the venture can still be a success.”

Sidebar

In The Blast Radius

Who was affected by the France Group’s Chapter Eleven?

In the way physicists often rely on the effects of a force on its surroundings to establish its existence, so fallout from the mess is easier to assess than exact causes.

The France Group bankruptcy protection filing lists around 800,000 dollars of payables due to suppliers. For example, Vince Miller’s design company Creative Edge is owed about 50,000 dollars.

“I doubt I have a five-percent chance of ever seeing a dime,” he says. “I used to be a supplier for Ty Ross, so when PIE took over management I continued. In fact, almost all the debt I’m owed is from the August 1998 to January 1999 period, when PIE was running the plant under Ross’ ownership.

“But when they didn’t pay it was the final straw,” continues Miller. “Coming off a 1997 were I lost around 150,000 dollars due to other snowboard companies failing, I had to think about my employees. So I sold my entire business to the Yoshida Group.”

Miller is still currently supplying the France Sport factory, but only materials for boards being made for Brunswick–which have been paid for in advance.

Bill Walton, president of both BW Woodcores and Snowtech, currently has independent legal actions against Ty Ross, France Sport, and the France Group to also recover around 50,000 dollars owed from the same period.

Winterstick moved its orders to France Sport after a disagreement with A-Sport over quality-control supervision, says Sales Vice President Steve Reinheir. These orders were backed by a letter of credit for 60,000 dollars for 474 advance-order boards and a further 400,000-dollar LC for the remaining production for this season.

Once the Chapter Eleven had been filed, Reinheir spent the next month in Goldendale, personally supervising the delivery of materials, building, packing, and shipping the boards for the smaller LC.

The large LC was then shifted back to A-Sport, which agreed to Winterstick’s terms and guaranteed delivery by November 15. This was possible as Winterstick already had most of the molds and materials.

Another OEM client, L.L.Bean, was also relatively lucky. “We received no product and won’t be getting any from France Sport. We closed the books on France Sport on November 2,” says Wintersport Product Developer Sheldon Perkins.

L.L.Bean had ordered 1,000 boards. France Sport, under the ownership of Ty Ross, delivered last season’s order, so Perkins met with the new PIE management and signed a purchase order in March ’99 with terms of net 30.

“In April, fearing problems, we offered to supply materials, but they declined, maintaining everything was on track,” says Perkins. “We went ahead and ordered graphics and topsheets and even took product photo shoots in Argentina.

“Once the Chapter Eleven was filed, they offered to allow us to purchase the materials, but we declined,” continues Perkins. “We were unable to find production with another OEM manufactures, because as a catalog business we have only a six-week selling window. If we could not 100-percent guarantee boards by mid November, the whole exercise would be pointless.

“Fortunately we had made our pricepoint Glade boards as a two-year purchase,” he continues. “The Kildyflex program was also over-ambitious at 600 dollars a board. So even without the boards, we have stock to cover all likely orders–especially since we’ve dropped the Kildyflex to 400 dollars. It could have been worse. You can safely bet, however, that we won’t ever again be doing business with any company related to Binks Gravel.”ics and topsheets and even took product photo shoots in Argentina.

“Once the Chapter Eleven was filed, they offered to allow us to purchase the materials, but we declined,” continues Perkins. “We were unable to find production with another OEM manufactures, because as a catalog business we have only a six-week selling window. If we could not 100-percent guarantee boards by mid November, the whole exercise would be pointless.

“Fortunately we had made our pricepoint Glade boards as a two-year purchase,” he continues. “The Kildyflex program was also over-ambitious at 600 dollars a board. So even without the boards, we have stock to cover all likely orders–especially since we’ve dropped the Kildyflex to 400 dollars. It could have been worse. You can safely bet, however, that we won’t ever again be doing business with any company related to Binks Gravel.”