A U.S. Trustee thinks Quiksilver should take a harder look at certain parts of the incentive and retention plan it outlined for key executives.
The plan, filed earlier this month in U.S. Bankruptcy Court, is broken into two parts. There is an incentive plan for three unnamed executives that would pay out to them 75 to 100 percent of their base salary as long as certain performance metrics are met.
The retention plan impacts 14 unnamed employees of whom Quiksilver described as “critical, hard to replace, non-senior management employees.” Those 14 would be in line to receive an aggregate of $659,556 with another $200,000 set aside for any additional employees that might become eligible to participate in the program.
The objection, filed in court Tuesday by acting U.S. Trustee Andrew Vara, takes aim at the goals outlined in the incentive plan for setting “the performance bar so low that the lowest targets are well within reach” thereby making it “not a true incentive plan; it is a disguised retention plan.”
U.S. Trustees, part of a program under the Department of Justice, are charged with oversight of bankruptcy proceedings and supervise Chapter 7 and Chapter 11 cases. Quiksilver, based out of Huntington Beach, Calif., filed for Chapter 11 bankruptcy protection in September.
Incentive plan participants would also be required to meet certain personal performance goals, which Vara’s objection also questions.
“Indeed, the personal goal for each participant is essentially ‘continue doing…your job as (title), plus do the extra things someone with your job title is supposed to do when the company is undergoing Chapter 11 debtor reorganization,’” the objection stated.
The incentive and retention plan is one of several agenda matters scheduled for a hearing Dec. 1.
There will still be much work to do once Quiksilver emerges from bankruptcy, with a global business that includes wholesale, retail and e-commerce.
The action sports company estimated in its reorganization plan filed this month that net sales in 2016 are expected to come in at around $1.25 billion, rising to about $1.3 billion the following year and $1.39 billion in 2018.
Quiksilver expects net income of $106.1 million in 2016, but will fall back to a loss of $2.3 million in 2017, in part due to projected losses in the Asia-Pacific region. Stronger performance in the Americas along with the Europe, Middle East and Africa regions are expected to help boost the company’s projected 2018 net profit to $26.2 million.