ARC to be liquidated ??

[twich54]

They appear to be in trouble, from a thread over @ WBF...........

Whither Audio Research

It would appear that in the past week in the State of Minnesota District Court, County of Hennepin Fourth Judicial District, the Audio Research Company has assigned its debts and assets (sic) to the Lightwave Management Group in Minnesota. They specialize in turnaround/bankruptcy and financial...

www.whatsbestforum.com

 

[Robert D]

I wonder if a big company will swoop in and buy them out?

 

[Rich]

Crap. And I need a new set of tubes for my Ref 3 Preamp.

 

[amey01]

I wonder if a big company will swoop in and buy them out?

Hope so, but would depend on how much debt they have I guess.

 

[Robert D]

Hope so, but would depend on how much debt they have I guess.

And, if they do buy it, will it continue to retain the high quality that its customers are accustomed to?

 

[Fidji99]

Actually ARC got sold some time ago by McIntosh.

The McIntosh Group Sells Audio Research Corporation to TWS Enterprises LLC

Minneapolis, Minnesota (August 25, 2020) – TWS Enterprises, LLC, a privately held company owned wholly by Trent Suggs, has agreed to purchase Audio Research from the McIntosh Group, Inc. subject to completion of due diligence which is expected to be finalized by the end of August. As Audio...

www.analogplanet.com

probably issues even before.

 

[Bernard]

probably issues even before.

The announcement includes the statement “Trent Suggs was relieved of control of Audio Research”, so it sounds like big issues.

 

[DanR]

Interesting, this is from February of this year.

Interview with Trent Suggs, Owner of Audio Research, Pt 1/3 — PMA

“At some point, I made a comment that one day I wanted to buy Audio Research.”

www.pmamedia.org

 

[Big Dog RJ]

I don't think it's a biggy... production, testing and packaging, plus tech support and service depts are in full swing running... so they're back-end is operational. It's their front-end that requires new leadership/ ownership. Once sorted, ARC's good to go!

Like I said, if no one puts their hand up, I'll buy it! ARC's far too valuable to ignore or lose as a vacuum tube icon! It's a legendary brand, without a doubt!

*actually I stand corrected* (according to one of my trusted sources)
Several parties have shown interest, within the next few weeks they'll make a decision. Only thing is, it has to be the right decision in order for ARC's engineering team to stick with what they know and perform at their best, rather than be told what to do and make things different... just like what IAG group did with Quad, an absolute disaster!

Hold onto your ARC gear maties, it's certainly not over yet! Keep those tubes glowing!
Woof! RJ

 

[amey01]

Like I said, if no one puts their hand up, I'll buy it! ARC's far too valuable to ignore or lose as a vacuum tube icon! It's a legendary brand, without a doubt!

If their debt ratio is too high, or they can't service their debt, then the company will collapse even if they give it to you for nothing!

 

[Big Dog RJ]

Yes fair point. Hopefully the damage done isn't too deep. Otherwise we'll have to send in Phil Lowe to sort it out... what a disaster he's caused for everyone in general (down unda).

From what I was informed is that Trent S did do his best or at least thought he was... until it hit the fan, so someone had to pull the plug on Trent. He was very passionate about the company and as a person who looked after his team. Not really sure how he managed to drive it into such a tricky financial situation. Feel bad for Trent, I hope he can at least still listen to some fine tunes.

Anyway, the new owners are on the horizon, and they'll bounce back one way or the other.

Cheers, RJ

 

[amey01]

Yes fair point. Hopefully the damage done isn't too deep. Otherwise we'll have to send in Phil Lowe to sort it out... what a disaster he's caused for everyone in general (down unda).

HAHAHA. He has got to be the worst central bank governor we have ever had.

Like anyone who has ever driven a car knows - you need to anticipate the road ahead and make gentle adjustments as necessary. You can't accelerate full tilt to get up a hill when you know there is a cliff 5 metres ahead. Far out!

 

[Big Dog RJ]

HAHAHA. He has got to be the worst central bank governor we have ever had.

Like anyone who has ever driven a car knows - you need to anticipate the road ahead and make gentle adjustments as necessary. You can't accelerate full tilt to get up a hill when you know there is a cliff 5 metres ahead. Far out!

Good one good one

 

[Big Dog RJ]

Trent Suggs seemed like a great chap, always put his "associates" first not employees... he also had great passion and experience in the brand. Wonder how he messed it up, maybe it wasn't even his fault to begin with. Anyway, person at the top has to take the flack.
Interesting times ahead.
Cheers, and keep those tubes glowing!
RJ

 

[Fidji99]

Minn. Bank Asks Court for $1.5M+ Judgment Against Audio Research Corp & Trent Suggs

A Minnesota Bank has filed an action in District Court asking it to issue a judgment against Audio Research & Trent Suggs of over $1.5 million

www.strata-gee.com

Whatever this means in lawyers English.

 

[Rehan Azim Hashmi]

Minn. Bank Asks Court for $1.5M+ Judgment Against Audio Research Corp & Trent Suggs

A Minnesota Bank has filed an action in District Court asking it to issue a judgment against Audio Research & Trent Suggs of over $1.5 million

www.strata-gee.com

Whatever this means in lawyers English.

High debt to equity ratio increases EPS. When GDP is increasing high gearing ratio delivers greater profit. Assuming concomitant increase in demand for firm product.

In this situation cash from sales covers all fixed interest expense, taxes and operating expenses. Whatever is left is very substantial and magnifies returns to shareholders.

However economy is not doing well perhaps. And demand for ARC product less. Another reason demand for ARC products is weak is lower good prices of competing brands. Resulting in loss of market share.

Because of downturn and scarcity of cash ARC unable to repay bank note payable. A danger of carrying much debt is creditors can take legal action for repayment of funds. Minnesota bank forced ARC to liquidate or sell assets to repay owed short term debts.

The sum the bank requires is not much keeping the corporate world in mind.

Solution:

If the owner can deliver a concrete financial plan to quickly make ARC solvent he may be able to rollover existing loan or get equity financing.

May help to reduce price and eliminate profit per unit.
Reduced price will help increase sale of inventory. Improve cash flow. ARC goods are coveted by consumers and undoubtedly sell rapidly at much reduced price.

Those in charge of financially managing ARC perhaps have made judgement errors.

 

[Big Dog RJ]

Mmm... this is not good. Certainly didn't see this coming. Well, what I meant was, I didn't expect this from Trent Suggs!!! He should have known better. This is what happens when you borrow more than you could afford to lose, and not paying back ends up in debt and you're labelled as "default." Definitely not a good place to be in.

As someone had replied in that post on the link, that's the best advice. Which is, file for proper bankruptcy then pay off whatever debt possible, draw up a clean sheet and start from a clean slate. Set aside the high priced vacuum tube gear, offer some "affordable" gear, make enough sales, cover the losses and pay off any remaining debt. Then and only then, start building highend vacuum tube gear again, and the ARC legacy will live on.

ARC refused to offer anything entry-level, and the masses could not afford their very high priced tube gear. As a result, people will go for many other brands, McIntosh, Parasound, Bryston, even Conrad Johnson makes some affordable tube gear that is not highend but still is a CJ tube product! It was too late when ARC introduced the I Series amps in different colors, trying to capture the younger audio high tech IT savvy customer. These guys aren't interested in tubes, they rather plug in their ear buds / headphones, download some itunes and listening to their wireless speakers. This is NOT ARC territory but ARC meant well trying to introduce such gear, it didn't work.

And on top of that, Trent S kept defaulting on his loans, accruing more and more debt. Sad story indeed. I'm a bit annoyed at this Trent chap, he should have known better or at least sought assistance on how to run a business, especially a high-end audio one. If he really didn't want to cater to the entry-level market, then make only a handful of products, like maybe just 4-5 items. Do them really well and make enough profit to cover the loans, and most of all, don't take large loans! This would have been a case study in one of my Masters Business courses, which I did in 2007. That may seem outdated by now but the bottom line remains the same, don't borrow unless you can pay back within a reasonable time frame. Otherwise you will be at default! This maties is a textbook rule in finance! Look it up!

I can only hope that someone will bail them out, and this person has to have a big heart and a true passion for ARC and the brand. All the very best,
RJ

 

[Big Dog RJ]

High debt to equity ratio increases rate of return to shareholders. High gear works in a booming economy. In a booming economy assuming concomitant increase in demand for product. Incoming cash from sales covers all fixed interest expense, taxes and operating expenses. Whatever is left is very substantial and magnifies returns to shareholders.

The American economy is not doing well perhaps. And demand for ARC product less. Demand could be low because of competition. Loss of market share.

Because of above scarcity of cash unable to repay bank note payable. A danger of too much debt is creditors can take legal action for repayment of funds. Forced involuntary liquidation on behalf of Minnesota bank.

The sum the bank requires is not much keeping the corporate world in mind.

Conclusion:

If the owner can find a concrete financial plan to quickly make ARC profitable he may be able to rollover existing loan or get equity financing.

May also help to reduce price and eliminate profit per unit.
lower price will help increase sale of inventory. Improve cash flow. ARC goods are coveted by consumers and May sell rapidly at much reduced price.

Those in charge of financially managing ARC perhaps have made errors of judgement.

Very true and sound advise. But ARC will not reduce prices on their REF series and sell for low profit. This is a no-go zone for them. Rather, they need to introduce a line with all the ARC-ness and high definition tube quality, make it entry-level, and make sure the damn thing sounds good. Put that ARC badge on the front and it will sell.
There's no point in looking at their Ref series line. This series needs to be parked for a while until they can get their ---t together. Once that's paid off and most of the bad debt is paid off, only then can they even think of re-introducing the Ref series. Perhaps once all this is behind them, they can introduce a commemorative product, an all out top line REF series and call it the ARC-FCB series (Audio Research Financial Comeback)... or something like that. That would be cool and even though it would be high priced, if you let people know that they are in "limited edition" it will sell!

Just my 50cts worth. (Note: I keep saying 50cts worth because I firmly believe that my point is more than 2cts worth).
Cheers, RJ

 

[amey01]

Very true and sound advise. But ARC will not reduce prices on their REF series and sell for low profit. This is a no-go zone for them.

It would be nice…..but I think it’s drawing a long bow. There is no “them” any more. The administrators are in charge and their only goal is to liquidate what they can, as soon as they can and pay off the debt.

The only hope is if it is determined that “trading out” of it can realise more money than liquidating In a short enough timeframe to satisfy the creditors.

 

[DanR]

Well it sure looks to me as though we’ve seen the end of ARC at least as we’ve all known it. Right now at least in the States, the economy is not good and in the hi-fi market at least the level of what we see selling on Audiogon and US Audiomart specifically sales are very very slow. I’ve been re-cabling my system, and buying and trying to sell other fairly high quality cables on both sites (Nordost and Cardas) and had ZERO interest and only ridiculously low ball offers from one individual that I promptly ignore. I just bought a power cord on US Audiomart and I asked the seller if he had any other offers on the cable and he said only 1 low ball offer that he ignored and that cable was for sale there for 2 months. I firmly believe that this level of slow sales has also occurred in the high end new equipment as well, and that it has a lot to do with ARC’s predicament.