8160 304th Avenue Southwest
Preston, Washington 98050
Fax: (206) 222-6499
Web site: http://www.rideinc.com
Incorporated: 1992 as Ride Snowboard Co.
Sales: $75.7 million (1996)
Stock Exchanges: NASDAQ
SICs: 3949 Sporting & Athletic Goods, Not Elsewhere Classified
One of the largest snowboard companies in the United States, Ride, Inc. is a leading designer, manufacturer, and marketer of snowboards, clothing, and related accessories. Ride’s merchandise was marketed under the brand names Ride, Liquid, 5150, Preston, Cappel, and SMP Clothing. Manufacturing operations were based in Preston, Washington.
As the 1992-93 winter ski season in the state of Washington neared, there were three individuals who awaited the arrival of snowstorms with distinct, anxious interest. In September 1992, Roger Madison, James Salter, and Tim Pogue had joined forces to found Ride Snowboards, a start-up venture expected—the three founders hoped—to cash in on the burgeoning growth recorded by the snowboarding industry during the early 1990s. The idea for the company was Madison’s. A former top executive at AEI Music Network and a graduate of Harvard’s business school, Madison had gone on to establish SonnenBraune, a manufacturer of indoor tanning equipment based in Redmond, Washington, a suburb of Seattle not far from the foothills of the Cascade Mountains. Just entering his 30s at the time, Madison was in search of an alternate-season business to complement SonnenBraune and he approached Salter, who ran a sporting goods marketing and excess-inventory business named C.A.S. Sports Agency Inc. Madison was looking to establish a snowboard company, and Salter appeared to be someone with the expertise to get the venture up and running. Before running C.A.S. Sports, Salter had headed a leading snowboard company named Kemper Snowboards, serving as president from 1987 until the company’s sale in 1990. When Madison approached Salter about starting a snowboard company, Salter suggested including Tim Pogue, operations manager for Kemper Snowboards at the time. Madison agreed and his consent set the stage for the initial cast of characters that would build Ride into an industry stalwart.
Pogue, whom Madison would later describe as a “marketing genius,” brought his own special talents to the undertaking, as did his two other colleagues. Madison, given his educational background, agreed to provide legal and business advice. In addition to these services, he provided the company with free office space and $250,000 in start-up money. Salter was an adept salesman and well-known throughout the industry, where he could boast of a wealth of distribution and manufacturing contacts. Pogue, of all the founders, was the iconoclast. A rabid snowboarding enthusiast, Pogue had at one time managed the professional riding team at Burton Snowboards Inc., a Vermont-based snowboard manufacturer that had pioneered the industry and stood as the unrivaled champion of the snowboard market at the time Madison, Salter, and Pogue plotted their course with their entrepreneurial venture. Pogue knew the snowboard market first-hand, as did Salter; and with Madison lending his business acumen and capital to the venture, Ride started off as a promising newcomer to the snowboarding scene in September 1992.
To make Ride’s debut known to the world, Pogue recruited a team of well-known professional snowboard riders to help market the company’s products. Each member of the Ride team was asked to help in the creation of the first line of snowboards, offering design and marketing ideas that helped refine the company’s conceptual approach to the market. From the start, Ride targeted the fastest-growing niche of the snowboard market: young, trick-oriented riders known as “freestylers.” Many of these teenage converts to the sport of snowboarding had adopted the ideals, attitudes, and fashion styles typical of skate-boarders and surfers. On the snow and at ski resorts, they were treading on unfamiliar ground, unlectured in the dictates of behavior at ski areas. Their emergence on the ski slopes, which began with a trickle and quickly developed into an irrepressible rush, was not well-received by skiers, touching off a derisive and divisive feud between the two factions. Accordingly, many of the younger, freestyle snowboarders viewed skiers as the Establishment and reveled in describing themselves as anti-Establishment, a perspective articulated by Pogue. Freestyle riders found a welcome voice in Pogue, who presented himself as a counterculture symbol of their mores. For Ride, this connection with the fastest-growing, most lucrative segment of the market went a long way toward establishing the company as a thriving concern.
Pogue wasted no time in allying Ride with the trendy freestyle movement. At the ski industry’s biggest trade show in 1993, Pogue grabbed the attention of attending retailers by setting up a massive purple skateboard ramp as a display and serving beer from a keg. Retailers were rapt and flooded Ride with orders for the company’s merchandise. The reaction was so overwhelming Ride did not have enough money to meet the demand and, consequently, some orders were left unfilled.
Although regrettable, the company’s inability to meet demand during its first abbreviated season did fit in with part of the operating strategy devised by Madison, Salter, and Pogue. The founders had resolved to distribute their products to selected dealers, rather than flooding the market with as many snowboards as they could produce. “Honda may be the world’s top seller of motorcycles,” Salter remarked, “but we prefer to be the Harley-Davidson of snowboards.” They were striving to give the Ride brand name an elite image within the snow-boarding world, and in future seasons purposefully pulled in the reins on distribution. The founders had ambitious dreams, to be sure, such as usurping the number one seat occupied by Burton Snowboards, but in their assault against competitors the trio had chosen a more methodical approach, one that could enable them to realize higher profit margins.
By the end of the company’s first year, a partial year consisting of the final three months, Ride had generated $208,000 in sales. It was an encouraging start, particularly the reaction ignited by Pogue at the 1993 ski industry trade show. As 1993 got underway, the Ride executives, with Madison serving as chairman, Salter as chief executive officer, and Pogue as president, scrambled to secure the capital they would need to expand the company’s operations. Friends and family members were coaxed out of cash to keep the enterprise going and the money was promptly used to strengthen Ride’s operations. Money was needed to manufacture the company’s snowboards, which were produced under contract in Austria by Pale Ski & Sports GmbH, and with the introduction of Ride’s clothing line, marketed under the name Cappel, additional financial resources were required. As the 1993-94 winter season approached, finding sufficient capital to keep the company going was becoming a strain, but the year concluded with robust financial results. For the year—the company’s first full year—sales leaped to $5.9 million and net income totalled $414,000, the first profit recorded by Ride (in 1992, the company lost $209,000 on its revenues of $208,000).
By the end of 1993, the vigorous growth of the snowboard industry was beginning to attract attention from outside the winter recreation industry. Tens of millions of dollars were being spent each year on snowboard equipment and clothing, and the annual total was rising meteorically. When Ride first opened its doors, there were an estimated 1.2 million snow-boarders in the United States. One year later, that figure had soared to nearly three million, and projections for future growth suggested even greater growth. Despite the energetic growth of the snowboard industry and despite Ride’s remarkable initial success, the company was in dire need of capital. By the beginning of 1994, the founders had tapped their family and friends for $2.5 million, but their persuasive pleas for cash had reached an end. Financial institutions, according to Madison, were not interested in lending any money, so that left the trio with two choices: private placement or conversion to public ownership. The Ride executives chose to go public, and in so doing became the first pure snowboard stock on the market.
Our primary competitive advantage on the retail sales floor and on the mountain is our earned reputation for technologically innovative, performance-oriented products that give riders the strongest, lightest and most reliable snowboard equipment in the industry. As our reputation grows, so too do the expectations of our riders. Exceeding their high expectations is what drives our commitment to continuous improvement in our design, engineering and manufacturing processes. Most snowboard companies rely on third-party design technicians, engineers and manufacturing facilities to create new products. At Ride, our in-house development staff —made up of highly experienced engineers and riders —collaborates with customers, retailers and our team of some of the world’s premier snowboard riders to help us attain our goal of being the first to market with products that redefine industry standards.
Ride Goes Public in 1994
Plans for Ride’s initial public offering (IPO) crystallized in the spring of 1994. The founders hired a small underwriter, Barren Chase Securities of Boca Raton, Florida, and in May the company made its debut on the NASDAQ Exchange, raising nearly $6 million from the IPO. Each of the founders became a millionaire overnight, as Wall Street embraced the first offering from out of the snowboard ranks. Pogue, in a familiar move, brought out kegs of beer and served cups to investors, as well as Ride-branded condoms, titillating Wall Street with his unique spin on representing a decidedly “anti-corporate” company basking in the limelight of the corporate mecca of the world. Pogue was ebullient and somewhat naive, confiding later, “I had no idea what going public meant. I figured it was just the prize for having made it.” Pogue would soon be enlightened to the ramifications of public ownership, but in the wake of the May 1994 IPO the celebrations were in full swing as Ride’s future became brighter with each passing day.
After two years of hustling for cash, the founders suddenly found themselves flush with cash after the IPO and immediately put their money to work. Ride went on an acquisition binge that carried into 1995, purchasing clothing and snowboard brands and a manufacturing plant. In August 1994 they picked up C.A.S. Sports, Salter’s original equipment and close-out business. Additionally, a new brand of snowboards, marketed under the name “Liquid,” was introduced in 1994. Liquid snowboards, retailed at prices lower than the company’s Ride snowboards, were distributed to regional and large-format sporting goods retailers, rather than the specialty snowboard and ski shops where Ride-branded merchandise was sold.
Against this backdrop, Ride’s stock value surged ahead, leaping in an 18-month period from $2 per share to $35 per share. The company and its stock value were growing by leaps and bounds, and Salter promised more of the same, projecting 30 percent annual market growth. Investors listened and believed, fueling the company’s eye-catching rise in the highly fragmented snowboard industry. Financial totals for 1994 provided tangible evidence of Ride’s resplendent success, underscoring the soaring optimism at the company’s headquarters. From the $5.9 million recorded in 1993, sales exploded to $25.3 million; net income, which had totalled $414,000 in 1993, hit $1.8 million.
On the heels of 1994’s remarkable financial totals, the founders continued to acquire companies and assimilate them into the Ride fold, still infused with confidence by the company’s achievement on the stock market and on the slopes. The company changed its name from Ride Snowboard Co. to Ride, Inc. in June 1995, in order to reflect the diversified scope of the company’s activities. A second public offering of stock in August 1995 yielded Ride net proceeds of more than $23 million, and from there Madison, Salter, and Pogue moved to purchase several acquisition targets. In September 1995, Ride acquired Thermal Snowboards, Inc., gaining manufacturing operations that were organized into a subsidiary named Ride Manufacturing, Inc., and 5150 Snowboards, Inc., a brand of snowboards that later was merged into Ride Snowboard Co. The following month, Ride acquired SMP Clothing, Inc., a surfing and skateboard apparel manufacturer that was organized as a subsidiary. When the deal-making in 1995 was concluded and the financial results were tallied for the year, the figures were as encouraging as ever. Sales jumped from $25.3 million to $74.8 million and net income soared from $1.8 million to just under $6 million. Externally, Ride appeared to occupy an enviable position in the $200 million U.S. snowboard industry. The company was making a concerted push overseas, hoping to rake in millions from the Japanese market. Domestically, Ride ranked as the second largest company of its kind in the country, trailing only industry stalwart Burton Snowboards, and its revenue growth was record-setting, ballooning from $5.8 million to $75 million in a scant two years. Internally, however, there were problems everywhere. Pogue and his fellow founders were about to be introduced to the attendant problems of too-rapid growth and the power of investors over a publicly traded concern.
Problems Surface in Mid-1990s
On the whole, the acquisition campaign sparked by the company’s May 1994 IPO had proven deleterious. There were exceptions, such as the addition of a company-owned manufacturing facility through the purchase of Thermal Snowboards, which reduced Ride’s reliance on third-party contractors and, consequently, increased profit margins, but many of the company’s problems in the mid-1990s stemmed from acquisitions made in 1994 and 1995. No acquisition had a more negative impact on Ride than the purchase of C.A.S. Sports. The addition of C.A.S. Sports ran contrary to the company’s strategy of limited distribution and angered specialty retailers, creating a maelstrom of animosity between Ride and its most important customers. Owners of specialty snowboard and ski stores, once the exclusive retailers of Ride-branded merchandise, were incensed to find their larger competitors offering the same merchandise from C.A.S. at significantly reduced prices.
There were other problems as well, problems that arose from the way in which the acquisitions were organized into the company. As the company expanded, the founders chose to operate the acquisitions independently, which led to superfluous managerial layers. At one time Ride had four chief financial officers—too many for a company of Ride’s size. One analyst noted as much, remarking, “A $60 million company running four independent units is clearly inefficient,” but perhaps more damaging to the company’s health was the lack of long-range planning. Market research at Ride consisted of calling a handful of retailers and friends, and, reportedly, numerous decisions were based solely on suggestions made by employees and team riders. The approach simply did not work effectively and may have led to a costly misstep in Japan, where projections fell far short of reality. Salter was convinced the Japanese market could deliver big growth and consequently he directed his distributor in Japan to sign a large contract. Shortly thereafter, the Japanese snowboard market became saturated with merchandise and the distributor was forced to cancel orders, leaving Ride saddled with inventory and unable to meet its growth projections.
As 1995 wore on, Ride’s predicament worsened. An industry survey suggested that the snowboard market was growing at about half the rate Salter had promised, which caused the financial community to reevaluate its assessment of Ride. Investors took a wary backstep, distancing themselves from the troubled snowboard company. Subsequently, their anxiety was heightened by the inexperience of Ride executives in the integral art of investor relations. Some analysts claimed Salter refused to take their calls, a charge Salter flatly denied, but whichever side was right was immaterial. Ride’s stock value plunged 50 percent in one month. The time for wholesale changes had arrived. The darling of Wall Street was reeling from poor management and too-rapid growth. Madison, Salter, and Pogue had been introduced to the ramifications of public ownership.
After the value of Ride’s stock dropped dramatically, investors demanded management changes. Salter resigned as chief executive officer in May 1996, and after his departure Pogue agreed to support the board of directors’ decision to recruit a more experienced leader. Pogue’s ebullience had turned to disenchantment, and the prospect of stewarding Ride’s fortunes was no longer as attractive as it once had been. Said Pogue, “The numbers everybody wanted and the reality of what Ride could do were two different things. It wasn’t about snow-boarding anymore. It was about pleasing Wall Street.”
New Management for the Late 1990s
The individual selected to effect the turnaround was Robert Hall, a former ski-industry executive who arrived in August 1996 and took over as chief executive officer in October. Pogue was pleased with the selection, but after being relegated to a lesser role by Hall he decided it was time to leave the company he had helped found. Pogue resigned the same month Hall took command, leaving Madison and Hall to lead the charge toward recovery. Hall restructured the company along functional lines, making its organizational structure more streamlined and efficient, and he sold the troublesome C.A.S. Sports business back to Salter. Hall also implemented long-range planning at Ride for the first time, but the changes made in late 1996 were not enough to cure Ride of its ills immediately. The company recorded a negligible sales gain in 1996 of less than $1 million and posted a $5.5 million loss, which was primarily the result of the costly mistake made in Japan.
As Ride headed into the late 1990s, its future fate was in the hands of Hall, who was working to reshape the company into a vibrant snowboard competitor once again. Although the company experienced financial difficulties in 1996, its position in the snowboard industry was formidable. In the years ahead, the highly fragmented snowboard industry was expected to enter into a consolidation phase, which, according to analysts, would make the big companies bigger. As one of the leading companies in the industry, Ride was expected to benefit from industry consolidation and, its executives hoped, hold sway as an industry giant in the 21st century.
Ride Snowboard Company; Ride Manufacturing, Inc.; Ride Canada, Inc.; SMP Clothing, Inc.
Winter Sports; Apparel; International; Manufacturing; Finance; Administration.
Epstein, Joseph, “Ride: As in Wild,” Financial World, January 2, 1996, p. 24.
Grinbaum, Kami, “Redmond’s Ride Snowboard Looks to IPO for Lift,” Puget Sound Business Journal, March 11, 1994, p. 13.
Markels, Alex, “A Snowboard Start-Up Hits Big Bumps,” Wall Street Journal, November 27, 1996, p. Bl.
Park, Clayton, “Ride Snowboard Attracts ’Shredders’ and Investors,” Puget Sound Business Journal, February 3, 1995, p. 1.
“Ride, Inc. Announces Third Quarter Sales,” PR Newswire, October 3, 1997, p. 1.
—Jeffrey L. Covell