At the recent Tucker Rocky/Biker’s Choice Dealer and Brand Expo in Texas we met again with MAG CEO Andy Graves for an update on where the company was in emergence from their November 2017 Chapter 11 reorganization filing process…..
“Well, the short version is that we are in good shape executing our business plan as filed with the bankruptcy courts, and in good shape for an end of March court date that should see us emerge from the process in early April.”
Andy Graves has made transparency the hallmark of the company’s dealings with its reorganization plan at all stages, but there was one thing in particular that I still wanted to ask about the process.
If having been a debt-for-equity swap with adequate interim funding in place to ensure the nearest possible to “business as usual”, why was it necessary to make a filing at all? Given that this was a pre-agreed deal, with all parties signed up to that agreement, couldn’t it have been simply handled as a sale transaction?
“Well, yes it could,” said Graves. “The problem with that though would have been the tax liability it would have triggered. The $350 million would have been interpreted as taxable sales income and therefore subject to tax. Under the filing process that issue goes away, in exchange for the company giving up all its tax allowances and credits to that point to offset the tax liability that isn’t incurred.
“So, although the filing triggered implications, not least for vendor payables, it was the only way to achieve the objective of reduced liabilities for the company post-filing. It was the only way to clear out those consequences of the transaction.
‘let’s be genuinely good at what we do’
“Secondly, there are legal benefits of a court process that make sure all classes of debt are treated equally. Ironically, this was especially important where vendor payables were concerned. It allowed us to commit to paying a maximum of 90 percent of our vendors 100 percent of the money we owed them at the time of the filing.
“It has been a tedious and costly process, but we determined at an early stage that it was the best foundation for us to be able to ensure ongoing trading and the nearest thing to “business as usual”. The court has granted us all the motions we applied for, all the measures we needed to take to continue the normal operations of the business. As a consequence, vendors that represent 99 percent of our sales have agreed to work with us moving forward.
“Within the space constraints we have at this venue, only one of the vendors we invited has declined to participate, and actually one, who will remain nameless, invited themselves after we reached agreement. We had 20 percent more advance dealer registrations than for last year’s show, I think the fact that dealers are still wanting to attend is testimony to the strength of those partnerships.
“Before the filing our fill rates were at an all-time record high, and with the changes and improvements that the Tucker Rocky and Biker’s Choice team is making to how we manage inventory, how we work with our vendors and our partners, we fully expect to be back at that level very soon and exceeding it as we get into the second half of 2018.”
Asked about inventory levels, Graves is bullish. “With the constraints on our capital position removed and the strong cash generating abilities the business has, we now have no constraints on inventory dollars. But that is only part of the story. Business as usual doesn’t mean we are complacent. In inventory terms this means stocking better, not just more, but smarter inventory.
“Let’s be genuinely good at what we do, and we have already made remarkable progress on many fronts in the past couple of years.
“We think that, without a doubt, we have the strongest outside sales force in the market. They know their products, they know their market and they know their customers better than anybody. Their response to the past few months has been nothing short of excellent, and they share and believe in our determination to be able to serve their customers better than ever before. They are a distinct competitive advantage.”
However, Graves is realistic about the challenges ahead. “Historically we have not been as strong in certain areas as our key competitors.
“I think we are closing the gaps and are definitely better today than we were a few years ago. Talk to me again in a couple of years and I am sure we will have improved still further. We have the skill sets, the experience, and the opportunity. Our quality of service is becoming world class and the quality of the products we offer already is.”
‘our sales force is a distinct competitive advantage’
In terms of the next 12 months, Graves is optimistic. He says that their court- filed business plan calls for sales revenues to be flat, “but if I were a betting man,” he says, “I wouldn’t be surprised if 2018 sees some growth, no matter how modest, in some sectors of the market.
“Although Harley has its issues with new model numbers, overall they are up in terms of the number of people buying and riding new and used machines. That’s good for the parts, accessory and apparel market. I do now sense some trickle down from the positive economic indicators, employment levels and stock market performance in terms of spending confidence and actual dollars.
“People are pointing to wage inflation as a potential issue, but I see that as a positive for businesses like ours. The higher the disposable income people have, the better the business outlook has to be.”
Talking about the changes seen at the MAG business units that were merged with Tucker Rocky in 2014, Graves says “we are now seeing some of the synergies emerge. The group structure is helping us tune the businesses to the opportunities they have. We are not worrying about the ‘why’, but dealing with the ‘what’.
“If you remember my commitment has always been to do everything we can to ensure profitability, and the synergies we are now seeing is allowing us to make multiple, improvements that added together are significant. If there is market growth, then my job is to make sure the business units are equipped to be able to take advantage. If not, then it is to make sure they can deal with whatever market realities they are confronted with. And I believe we have already made progress and are headed in the right direction.”
When I first met Graves a year ago, and again after the filing, I challenged him to speak to the profitability of the business, and did so again. “I know there is a lot of noise still out there about that, but I keep coming back to the basic fundamental about the filing. If we hadn’t been in a position of underlying profitability, our options for moving forward would have been limited.
“In operational terms, the businesses overall are profitable. Some brands have made better progress than others, but they all are headed in the right direction and some of them are growing in a down market.
“Once we have emerged from the filing process, we will be able to further leverage the unique skills and capabilities the group has, and the benefits of that will become clear for all to see.”
BikeMaster: “Is a brand that is continually striving to deliver a complete line of tools and replacement maintenance parts for sport, cruiser and off-road motorcycles at reasonable prices. We want to offer the parts that keep bikes running at peak performance,” says Lowell Anderson, new Director of Brands for Tucker Rocky. BikeMaster recently released a new line of high quality inner tubes, oil and off-road tools and has plans to add more tools and replacement parts to the range in the near future; www.bikemaster.com
Twin Power: Founded in 1982, Biker’s Choice/Tucker Rocky published a first new Twin Power brand catalog three years ago after a 34-year absence and has re-energized to program under the expert guidance of V-twin industry veteran James Simonelli. The original Twin Power program earned a reputation for providing quality performance parts at a fair price, and Simonelli’s assured curation is seeing that reputation re-established with hard to find parts, many of which are the only alternatives to often out of stock OE components, ranging from old school to tomorrow’s classic motorcycles. “From pistons for Ironhead Sportsters to high-tech lithium ion batteries, we have more performance parts for more applications than ever, tested in independent labs to ensure that they fit and work like they should”; www.twinpower-usa.com
Cyron: Chatsworth, California based manufacturer of LED single and dual beam headlights, daylight running lights, passing lights and accent lighting; www.cyronmotor.com
Two Brothers Racing: New to the Biker’s Choice program last year, new products from the Santa Ana, California manufacturer include slash-cut end caps for its line of Touring slip-on systems. In addition to the existing carbon fiber and billet aluminum caps available for TBR slip-ons, the company now offers Touring slip-on systems with “slash-cut” aluminum end caps. Machined from 6061 aluminum, they feature a rotational mounting design and are available in black anodized or polished, and can be retro-fitted to existing TBR slip-on mufflers www.twobros.com
Barnett Clutches & Cables: Recent additions from the Ventura, California based specialist include black-on-black “Stealth Series” cables, featuring a black vinyl casing with black chrome elbows and hardware for that “Stealth” look. Stainless steel wire rope is used with a nylon inner liner on the throttle cables, and all clutch cables come as standard with Barnett’s exclusive high-efficiency inner wire for reduced lever effort and extended cable life; www.barnettcables.com