Nevada Bob's to revert stores back to franchises

In a marked change of course, retailer Nevada Bob's Golf Inc. has announced it plans to sell off ownership of its stores and turn them back into franchises in an effort to raise much-needed cash and pay down its heavy debt load.

The Globe and Mail
October 11, 2000

Nevada Bob's to revert stores back to franchises
Burdened with $30-million (U.S.) in debt
Guy Dixon

In a marked change of course, retailer Nevada Bob's Golf Inc. has announced it plans to sell off ownership of its stores and turn them back into franchises in an effort to raise much-needed cash and pay down its heavy debt load.

In its quarterly financial statement released yesterday, the Calgary-based golf specialty retailer said it plans to convert itself into a "franchise-focused operation," reversing its strategy over the past three years of buying up franchises and quickly expanding the company.

But burdened with $30-million (U.S.) in total liabilities, the company has had to embark on a massive selling spree.

The selloff includes the disposal of its Alien Golf manufacturing division and its distribution operations.

In August, the retailer sold its e-commerce rights, including registration of the Nevadabobs.com Internet site to Toronto-based Sheridan Reserve Inc. for $4-million in cash and $2-million in Sheridan stock. Sheridan has since changed its name to Nevadabobs.com Inc. and is currently redesigning the site.

The latest plan to revitalize the golf retailer, however, still requires approval from the its senior lenders, creditors and franchisees and runs the risk of securing additional interim or permanent financing,
Nevada Bob's said in a statement.

"The company is presently in continuing default of certain loan covenants with its senior lender and is presently unable to pay its financial obligations as they become due," Nevada Bob's said in its financial statement yesterday, adding that it is "working with its lenders to cure the defaults."

The turnaround plan has also caused a continual shakeup among the company's top brass as Tony Loth, who took over as chief executive officer from Lyle Edwards in late July, has now also assumed the role of chief financial officer from Allen Smith, who stepped down for personal reasons, Nevada Bob's said yesterday.

Mr. Loth, who works out of Alien Golf's Arlington, Tex., office was unavailable for comment yesterday.

In response, Nevada Bob's shares sank yesterday to a new 52-week low of just 4 cents (Canadian), down 2.5 cents on the Toronto Stock Exchange.

This is taking place just as golfing has reached new heights of popularity as pro tour sensation Tiger Woods storms the greens and a burgeoning number of younger players take up the game.

But as the sport continues to gain popularity, golf retailing, which less than a decade ago was largely restricted to tiny country club shops and the far corner of sporting goods stores, has fallen under heavy competition from the big golf outlet stores and discounting by equipment makers.

The original Nevada Bob's stores, started by Las Vegas-based golf enthusiast Bob Elton in 1974, eventually expanded into a byzantine system of franchising and ownership agreements that former company head Lyle Edwards and his partners in Calgary began rapidly buying up in 1998 and 1999.

In September, 1999, the Canadian company acquired its U.S. namesake Nevada Bob's Pro Shop Inc. of Las Vegas and Texas-based GDH International Inc., which added to its debt, including a $13-million term loan to help pay other loans.

With the company now hoping to sell off "substantially all" of its retail store operations over the coming year, it is meeting with creditors to stay in business.

"A lot of those things just aren't finalized yet, and we are still working away on it, and it will be meetings all this week before we can really say exactly where we are at," said Scott Collisson, Calgary-based senior vice-president of retail.


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