DVS Shoe Co. filed for Chapter 11 bankruptcy reorganization today, company executives shared with me this afternoon.
In the filing, which includes the Matix brand, the company is opting for what’s called the 363 auction process.
This process usually involves a “favored bidder” who has certain advantages in the process. Currently, DVS Shoe Co. is in talks with interested parties but a final document has not been signed so executives did not want to disclose the names of potential new investors yet.
The court will oversee the bidding process and with the advice from DVS, determine the best fit moving forward, DVS executives said.
Brian, Kevin and Mike Dunlap and Tim Gavin, owners of the company, answered some questions for me about the reorganization process and what pushed the company over the brink.
Can you walk us through a few of the challenges Podium has faced the last few years that has forced this reorganization?
Our biggest challenge has been dealing with our senior lender. When they were going through their own problems they changed our borrowing base without notice and that is when the problems started. Their unwillingness to work with us through these challenging times has been very difficult.
Another factor was restructuring our robust European infrastructure. We have always been very committed to our international business and constantly reinvested there to sustain our growth. To keep inline with our sales we had several subsidiaries throughout Europe that needed to be consolidated and that process was very expensive. Anyone with operations in Europe will know exactly what I am talking about.
To start this year we had some circumstances out of our control that occurred that did not help things. Our main vulc factory did not meet its obligations to produce our shoes for SP 12 and our 3PL warehouse closed its doors. Those two things happened within two to three months of each other and were just brutal.
The other issues were basically the sum of challenges everyone else is facing with the economy, the tough US retail environment, and increasing factory and raw material costs from China.
See Page 2 for more details about the DVS Chapter 11 filing
Why did you choose to go through the 363 process? What are your expectations on this process?
First, it is the fastest reorganization process available. We expect to close this within 45 days, which is extremely fast and will not really interrupt our business. Initially, we did not think this process was necessary and frankly did not understand it all that well.
After working with several investment groups we started to better understand how this process will benefit our new partners by eliminating liabilities and being able to have a fresh start.
The obvious downside of this is that it will impact our vendors and companies that we have worked with over the years. There has been a great deal of interest in the brands and we are confident that this process will line ourselves up with a strong partner for the future.
What will this mean to your employees?
We will have to downsize in certain areas to remain lean throughout the process. We have a lot of very solid employees who have put a lot of effort into the brands over the years but unfortunately we have to make these adjustments in order to complete the process.
Once the process is completed we plan to ramp back up depending on our needs/synergies between Podium and our new partner (that new partner will be determined at the auction).
Will you be able to deliver product during this time? Will there be delays?
We will definitely be delivering product. I would be naive to say there will be no hiccups, but we will do our best to work with current and new vendors to insure continued business. Our shoe factories are set up well for this process and have given us no indication of production issues.
Is this why Paul Gomez left?
Paul joined us at a difficult time as we were in the middle of all this restructuring, but he understood the game plan and was fine with it. In the end there were just certain commitments he was unwilling to take and he decided it was best to go separate ways. We appreciate his effort during his short tenure and wish him the best.
With the reorganization, is there the potential that Podium will end up under new ownership with a new direction?
The reason we have so many interested investors is because they believe in the brands and the direction so I do not see a change there. As far as ownership, there will definitely be a change of some sort, but that is to be determined as the process plays itself out.
We have prepared for this and have all the right people in place to make this a very successful transaction. This transaction will truly be beneficial for the brands and employees moving into the future. Most of all it will allow us to finally get rid of the bank and all this nonsense and focus 100% of our time on the brands again.
You, your brothers and Tim Gavin started DVS in 1995. How are the four of you handling this turn of events in the business you have put everything into?
Since we were groms we have all lived and breathed this lifestyle. We did it all from skating, surfing, BMX, snowboarding, and moto. To be able to create a brand that is globally recognized in this industry is more than we could ever have imagined.
The last couple of years have obviously been very stressful and tiring but we have put everything into it and are not about to quit. We have invested everything into these brands and have a lot of great employees and retailers counting on us to deliver. We have always been a very tight family and just try our best to roll with the punches and do the right thing for the brands, employees and customers.
In the end we are looking to have fun again and build back back up a good business model.
Anything else you want to tell people?
We would like to take this opportunity to thank all of the employees, athletes, reps, retailers, distributors and agents who have supported our brands over the years. It has taken a group effort to build up these brands and we appreciate everyone’s hard work and dedication.
