2002: Business - Carbite layoffs reflect game’s difficult times

In a golf industry marked by increased consolidation and conglomeration, Carbite Golf could be a bellwether signaling troubled times for small golf companies. So says Stan Sopczyk, who took over as Carbite’s president and chief executive officer in June.

On Aug. 15, Sopczyk found himself in the awkward position of announcing that Carbite, a wedge and putter manufacturer with headquarters in San Diego, had laid off virtually its entire work force and suspended operations. This action followed a lawsuit filed in New York federal court by Inabata America Corp., Carbite’s primary lender.

According to the suit, Carbite owes $1.495 million to Inabata America. Lawyers for Inabata also sent letters to all Carbite customers, instructing them that any money owed to Carbite should be sent directly to Inabata.

“We are not taking any orders, we are not shipping anything,” said Sopczyk, who said a decision on Carbite’s future probably will be made by the end of August.

Carbite was founded in 1988 by metallurgical engineer Chet Shira. The company quickly gained a reputation for its high-friction, high-spin face inserts in wedges. In 1998, the winners of all four professional major championships carried at least one wedge with a Carbite insert.

As Carbite began to concentrate more on putters and less on wedges, it consistently ranked among the top five U.S. manufacturers in off-course putter sales in the late 1990s. When larger manufacturers began slashing prices, however, Carbite’s position began to slip.

In 2000, Carbite reported sales of $14 million and a net loss of $3.1 million. In 2001, sales dropped to $10.3 million and the loss jumped to $4.8 million. In the first quarter of 2002, ending March 30, Carbite sales were $2.67 million for a loss of $303,000.

“The little guy is going to be very hard-pressed to survive in this business,” said Sopczyk, who started in the golf business in 1980 with TaylorMade. “Everything is being orchestrated by the big companies. They have been dumping a lot of stuff into the market – at longer terms, which we couldn’t compete with. About 25 percent of our business every year, we could count on that going to Japan. That isn’t happening anymore.

“We are trying to formalize a plan. We have almost $2 million in secured lending between U.S. Bank and Inabata. We looked at Chapter 11 (bankruptcy reorganization), but it didn’t seem feasible. We didn’t have enough cash assets to satisfy the secured lenders. It didn’t look like there was much chance of doing a reorganization in the golf industry the way it is today.

“I am very sad about this. Everybody thinks the product is great. We have our ball license with Wilson (Carbite holds the patent on the balancing concept used in the Wilson Staff True ball), and we have our intellectual property. We have developed many wonderful products, but June came in 30 percent below our forecast and July was 60 percent below. I can’t begin to describe how tough it is out there.”

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