Huntington Beach-based Quiksilver Inc.? 2005 acquisition of French ski maker Rossignol was a mistake, the company? chief executive said last week.
?n 2005, we made a mistake,?said Bob McKnight in speech at University of California, Irvine? business school. ?e do make mistakes, because CEOs are only human.?
McKnight spoke as part of a yearlong series of executive speeches hosted by the Paul Merage School of Business at UC Irvine.
In a nearly two hour speech, McKnight reflected on the start of Quiksilver and on the past year, which was dominated by November? fire sale of Rossignol, the stock market crash and a downturn in sales for surf-inspired clothes.
?t? amazing after 30 years we?e still No. 1, though we?e currently working through some rather rough times,?McKnight said.
Quiksilver, which designs clothes inspired by surfing, skateboarding and snowboarding, faces a severe retail downturn and a crushing debt from its $560 million buy of Rossignol.
McKnight recounted events leading up to the acquisition and agreed many of the naysayers where right about the deal.
?e heard from the analysts, how it was French, it? factories, it? equipment, it? old and seasonal,?McKnight said. ?ll true, and yet we bought it anyway.?
Quiksilver restructured Rossignol throughout 2006 with massive layoffs and staff changes. Even after cutting costs, the company incurred big losses after it was hit with a terrible winter in Europe.
?e were all set to go when we had the worst winter in like five decades in Europe,?he said.
Quiksilver ended up selling money-losing Rossignol for $50 million?r less than 10% of what it had paid for it?ate last year.
The company had hoped to get more than twice as much, McKnight said.
?e were all set to sell the week of Sept. 15 when Lehman Brothers declared bankruptcy,?he said. ?he Rossignol offer fell from 110 million euros to just 40 million euros just like that.?
Little Help
The fire sale did little to alleviate long-term debt incurred in buying the business and short-term borrowing to keep Rossignol afloat before the sale.
?o make a long story short, we sold the company and it left us with a lot of debt in a really tough time,?McKnight said.
Quiksilver had $1 billion in short- and long-term debt as of the end of January. About $315 million is coming due this year and in 2010.
In March, the company hired boutique investment bank Peter J. Solomon & Co. to help raise money or find an investor. Quiksilver also continues to talk with lenders about reworking its debt, McKnight said.
?e still have several bankers working with us with different banking agreements in America, France and Asia,?he said.
The company? European lenders gave it a two month reprieve on a $70 million line of credit based on a pending sale of what? widely expected to be DC Shoes.
?e are also looking to sell off an asset or two,?McKnight said.
Even with a DC Shoes sale, Quiksilver still would need help with its long-term debt.
Meanwhile, Quiksilver has dramatically cut back its operations as it focuses on clothes.
Some speculate that surfwear may be dead, giving way to the likes of Seal Beach? Affliction Inc. and its edgier mixed martial arts and rock inspired clothes.
?t really gets my goat when Wall Street tells me this thing is a fad,?McKnight said. ?veryone loves the beach and it? here forever.?enews_Column=0
