Indeed, through a combination of bad luck and bad management, the company was geting deeper and deeper into trouble, even as its revenues continued to grow. First there was an illconceived attempt to establish a British operation, which wound up costing BRC $400,000. Even more problematical was the increase in competition back home, as a number of large shoe manufacturers -- Nike, Adidas, New Balance, Saucony -- brought out clothing lines of their own. The timing couldn't have been worse, coming just as the market was nearing saturation. The combination of a softening market and steeper competition squeezed everybody's margins. And to make matters worse, BRC was having problems with a new subcontractor in Puerto Rico, where Yahn had begun to do some manufacturing in a cost-cutting move. Quality suffered, and flexibility disappeared.
Such troubles only intensified the shareholders' desire to sell, but internal dissension continued to be an obstacle. "I bumped into a guy from Levi Strauss," remembers Rodgers, "who knew the running world and was very interested in our business. He told me Levi was also looking at Frank Shorter's company, but that he'd rather deal with me. Unfortunately, there was a lot of disagreement [among the shareholders] over what the company was worth. Drew [Mearns] was telling me one thing, Ellen was insisting on a figure of her own, and Rob was probably worried about his own future with the company if we sold it. While all that was going on, the deal fell through. And then Levi Strauss turned around and bought Frank Shorter. I was really depressed."
This setback notwithstanding, the shareholders retained the investment banking firm of Bear, Stearns & Co. to value BRC and to help sell the company. At the time, Bill Rodgers & Co. (with '84 revenues of $8.5 million and pretax profits of $634,000) still looked like an attractive property; Bear, Stearns fixed the selling price at somewhere between $2.5 and $4 million.
Throughout 1985, Yahn concentrated his energies on finding a buyer. Several seemed interested, but none followed through. His efforts, he now agrees, were a form of managerial denial -- a way to avoid admitting how fast things were going downhill. "I'm sure I could have spent my time better managing the company," Yahn offers, "but I didn't. And every time somebody looked us over, we looked worse." On that score, anyway, he finds himself in unusual agreement with McCarter, who was appalled at the company's credit-control policies and incensed that BRC kept shipping to delinquent accounts.
"Rob's standard line was, 'We're working on it," says McCarter. "Maybe he was in over his head, and maybe he didn't want to let go. But the Bank of Boston was still enthusiastic about the company. And the bottom line was, we were still showing a profit at that point. By the end of '85, the consensus among the [shareholders] was, let's sell his sucker and get out."
By the end of '85, some of the players already had gotten out. One was Mearns, who left Bill Rodgers's employ to open his own sports agency. More unsettling was Ann Hartman's leavetaking from the Bank of Boston. Hartman had been the company's main contact there, a sympathetic insider who, according to Yahn, knew more about the company's financial position than anyone but himself. Well she might. BRC's debt to the bank was mushrooming. In addition to the original loan, the company now had an overadvance, or seasonal loan, which allowed it to borrow above its standard credit line during periods when sales were slow and production needs high. As a result, BRC was into the bank for more than $25 million.
So Yahn was shocked when he stopped by Hartman's office one morning and found it empty. "My first though," he says, "was that she'd been fired for loaning us too much money." When he finally tracked her down at home, Hartman told Yahn not to warry -- that her departure was voluntary and had nothing to do with the amount of money the bank had fronted to BRC. She did say, however, that she'd been admonished for promoting management's point of view and warned Yahn that the bank might start "clamping down pretty hard."
Shortly thereafter, Yahn got a call from his new loan officer. "Hi," she said cheerily. "When are you planning to sell the company?"
ODY CORMIER ATTENDED THE FEBRUARY '86 trade show in Dallas at which Bill Rodgers & Co. was showing its new fall line. His presence was indicative of his concern, and his concern was understandable. As founder and president of Cormier Corp., a Laconia, N.H.-based apparel manufacturer, he was one of BRC's principal suppliers of finished goods at a time when the company was having trouble paying its creditors. It owed its advertising agency and its main fabric supplier, W.L. Gore & Associates Inc., sums in the six-figure range, and Cormier himself had advanced BRC $500,000 in unsecured trade credit, allowing the company to continue manufacturing while it searched for a solution to its problems. The solution, everyone agreed, was to sell the business. Yahn pulled Cormier aside in Dallas and assured him that the sale of BRC to CB Sports Inc. was a couple of weeks away. "Rob was giving me just the highlights," says Cormier, "but he really believed the company was still viable in the marketplace, and I had faith in him."
The bank, on the other hand, was rapidly losing faith. At its insistence, the shareholders had anted up an additional $130,000 in working capital, but that was not enough to keep the BRC file from being kicked upstairs to the 12th floor, where "troubled loans" were handled. The bank also informed the company that it had no obligation to lend it further funds beyond July 1, 1986, and demanded that Yahn and Rodgers take out second mortgages on their houses to guarantee the overadvance, which had previously gone uncollateralized. At the time, Rodgers had just bought a new house in Dover, Mass. Believing the sale of the company to CB Sports was imminent, he gave the bank the guarantee it was seeking.
