CARLSBAD, Calif., Nov. 30, 2018 /PRNewswire/ -- Callaway Golf
Company (NYSE: ELY) announced today that it has entered into an
agreement to acquire Jack Wolfskin for €418 million, or
approximately $476 million assuming a
1.140 Euro to US Dollar conversion
rate, subject to certain purchase price adjustments.
The acquisition furthers Callaway's push into the active
lifestyle category after its successful 2017 acquisitions of
TravisMathew and Ogio. Jack Wolfskin is an international, premium
outdoor apparel, footwear and equipment brand. The company designs
premium products targeted at the active outdoor and urban outdoor
customer categories.
"We are very excited to welcome the Jack Wolfskin brand into the
Callaway portfolio," commented Chip
Brewer, President and Chief Executive Officer of Callaway.
"Jack Wolfskin is a premium outdoor brand with tremendous
international reach, being a leading brand in the European market
and having a substantial presence in China. It also helps Callaway expand its
presence in the high-growth, active lifestyle category."
Mr. Brewer continued, "We are also very excited to work with
Jack Wolfskin's great leadership team, led by CEO Melody
Harris-Jensbach, to maximize this brand's growth potential."
"We are thrilled at the prospect of joining Callaway's growing
portfolio of premium, active lifestyle brands," said Jack
Wolfskin's Chief Executive Officer Melody Harris-Jensbach.
"Callaway has proven over many years that they are great innovators
and brand builders. We see that they really invest in the brands
they acquire and couldn't be happier to be working with them."
Assuming a 1.140 Euro to US Dollar
conversion rate, Jack Wolfskin had net sales of $380 million in the fiscal year ended
September 30, 2018, based on
preliminary unaudited results provided by Jack Wolfskin. Jack
Wolfskin provides over 3,000 points of sale globally, including
wholesale, company-owned retail and franchised retail stores. Post
transaction, Jack Wolfskin will continue to operate out of its
headquarters located in Idstein, Germany.
The $476 million purchase price
values Jack Wolfskin at a multiple of approximately 12 times its
fiscal 2018 adjusted EBITDA of $40
million. Excluding non-recurring transaction costs and
non-cash purchase accounting adjustments, financial expectations
for Jack Wolfskin are as follows:
- Full year 2019 net sales are estimated to be flat compared to
prior year, but are expected to accelerate to mid-single digit
growth over the mid- to long-term.
- Full year 2019 adjusted EBITDA, excluding purchase accounting
adjustments, is estimated to be approximately $33 million, a decrease compared to the prior
year as a result of incremental investments to build long-term
sustainable growth as well as projected cost of living
increases. The investments would include investments in
design, marketing and infrastructure to allow for growth in Jack
Wolfskin's core business as well as future expansion into new
regions.
- EBITDA is estimated to reach $50
million in 3-4 years, with long-term EBITDA margins
forecasted to be accretive to Callaway's current EBITDA
margins.
- Full year non-GAAP earnings per share (EPS) is estimated to be
$0.06 dilutive in year 1 and
accretive in year 2. Non-GAAP EPS excludes non-recurring
transaction costs, amortization of financing fees, and incremental
non-cash expense resulting from the purchase accounting
adjustments.
- Full year GAAP EPS is expected to be $0.25-$0.35
dilutive in year 1 and approximately neutral in year 2. GAAP EPS
includes non-recurring transaction costs and incremental non-cash
expense resulting from the acquisition purchase accounting
adjustments.
The acquisition is expected to close in the first quarter of
2019, subject to regulatory approvals and other customary closing
conditions. Callaway intends to finance the transaction with a
$476 million term loan facility, led
by BofA Merrill Lynch and JP Morgan Securities LLC.
Latham & Watkins LLP acted as legal counsel and JP Morgan
Securities LLC acted as exclusive financial advisor to Callaway.
Kirkland & Ellis International LLP acted as legal counsel and
Houlihan Lokey as exclusive
financial advisor to Outdoor Holdings SCA - the holding company of
Jack Wolfskin. THM Partners acted as director of and advisor to the
Jack Wolfskin Group.
Conference Call and Webcast
Callaway will host a conference call at 5:30 a.m. Pacific Time to discuss today's
transaction. The call will be broadcast live over the Internet and
can be accessed at http://ir.callawaygolf.com/. To listen to the
call, and to access Callaway's presentation materials, please go to
the website at least 15 minutes before the call to register and for
instructions on how to access the broadcast. A replay of the
conference call will be available approximately three hours after
the call ends, and will remain available through 9:00 p.m. Pacific Time on Friday, December 7,
2018. The replay may be accessed through the Internet at
http://ir.callawaygolf.com/
Non-GAAP, IFRS and Unaudited Financial Information
The financial information for Jack Wolfskin presented herein,
including net sales, EBITDA and adjusted EBITDA, has been prepared
in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union, and is based on
preliminary unaudited results provided by Jack Wolfskin. These
preliminary estimates are subject to finalization of year-end
financial and accounting procedures (which have yet to be
completed) and have not been audited or reviewed by Callaway's or
Jack Wolfskin's independent public accountants. As a result, such
estimates are forward-looking statements and are not guarantees of
future performance or outcomes, and actual results may differ
materially.
The GAAP forecasted amounts contained in this press release have
been prepared in accordance with accounting principles generally
accepted in the United States
("GAAP"). To supplement the GAAP results, Callaway has
provided certain non-GAAP financial information as follows:
Acquisition-Related Adjustments. Callaway presents the
expected future dilutive or accretive impact of the Jack Wolfskin
acquisition on EPS excluding non-recurring transaction costs,
amortization of financing fees, and incremental non-cash expense
resulting from the acquisition purchase accounting adjustments.
Adjusted EBITDA. Callaway provides information
about Jack Wolfskin's fiscal 2018 results, as well as forecasted
EBITDA, excluding interest, taxes, depreciation and amortization
expenses, as well as further adjusting for restated product costs
at an assumed Euro/USD exchange rate of 1.14. Callaway has
included in the schedules to this release a reconciliation of Jack
Wolfskin's fiscal 2018 net sales to adjusted EBITDA, based on
preliminary unaudited results prepared in accordance with IFRS and
provided by Jack Wolfskin.
Callaway believes this presentation of Jack Wolfskin's EBITDA
and adjusted EBITDA is useful and helps management, investors and
rating agencies enhance their understanding of the impact of the
Jack Wolfskin acquisition on Callaway's financial performance.
However, EBITDA and adjusted EBITDA do not have a standardized
meaning, and different companies may use different EBITDA and
adjusted EBITDA definitions. Therefore, Jack Wolfskin's definition
of EBITDA and adjusted EBITDA may not be comparable to the
definitions used by other companies.
Non-GAAP financial measures should not be considered in
isolation or as a substitute for financial information calculated
in accordance with GAAP. Investors are encouraged to review the
reconciliation of EBITDA and adjusted EBITDA to the most directly
comparable GAAP financial measure. A reconciliation of Jack
Wolfskin's EBITDA and adjusted EBITDA to net income and net sales
has been provided below.
Forward-Looking Statements
Statements used in this press release that relate to future
plans, events, financial results, performance or prospects, and
statements relating to the expected benefits of the Jack Wolfskin
transaction, including future synergies and growth opportunities,
and the estimated financial results and sales and earnings
contribution from Jack Wolfskin, are forward-looking statements as
defined under the Private Securities Litigation Reform Act of 1995.
These statements are based upon current information and
expectations. Accurately estimating the forward-looking statements
is based upon various risks and unknowns, including the risk that
the Jack Wolfskin transaction may not close on the terms or timing
described herein, or at all; unanticipated difficulties or
expenditures relating to the transaction or the realization of the
anticipated synergies and growth opportunities; the response of
customers, suppliers and others to the announcement of the
transaction; potential difficulties in employee retention as a
result of the transaction; consumer acceptance of and demand for
the Company's products; the level of promotional activity in the
marketplace; unfavorable weather conditions; future consumer
discretionary purchasing activity, which can be significantly
adversely affected by unfavorable economic or market conditions;
future retailer purchasing activity, which can be significantly
negatively affected by adverse industry conditions and overall
retail inventory levels; and future changes in foreign currency
exchange rates and the degree of effectiveness of the Company's
hedging programs. Actual results may differ materially from those
estimated or anticipated as a result of these risks and unknowns or
other risks and uncertainties. For additional information
concerning these and other risks and uncertainties that could
affect these statements, see Callaway's Annual Report on Form 10-K
for the year ended December 31, 2017
as well as other risks and uncertainties detailed from time to time
in Callaway's reports on Forms 10-K, 10-Q and 8-K subsequently
filed with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Callaway
undertakes no obligation to republish revised forward-looking
statements to reflect events or circumstances after the date hereof
or to reflect the occurrence of unanticipated events.
About Callaway Golf
Through an unwavering commitment to innovation, Callaway Golf
Company (NYSE: ELY) creates products designed to make every golfer
a better golfer. Callaway Golf Company manufactures and sells golf
clubs and golf balls, and sells bags, accessories and apparel in
the golf and lifestyle categories, under the Callaway Golf®,
Odyssey®, OGIO, and TravisMathew brands worldwide. For more
information please visit www.callawaygolf.com, www.odysseygolf.com,
www.ogio.com, and www.travismathew.com.
About Jack Wolfskin
Jack Wolfskin is one of the leading providers of functional
outdoor clothing, footwear and equipment in Europe and the largest franchisor in the
German specialist sports retail market. JACK WOLFSKIN articles are
currently available in more than 3,000 points of sale across the
globe. JACK WOLFSKIN articles feature a high degree of
functionality, user-friendliness and innovation. In recent years,
JACK WOLFSKIN successfully introduced numerous material and product
innovations. The company is a member of Fair Wear Foundation and a
bluesign® system partner. JACK WOLFSKIN has also been a member of
the "Zero Discharge of Hazardous Chemicals" initiative since 2012.
Jack Wolfskin is the official provider of apparel for the Innsbruck
Alpine School. For more information please visit
www.jack-wolfskin.com.
CONTACT: Brian Lynch
Patrick Burke
(760) 931-1771
Jack Wolfskin
Adjusted EBITDA Reconciliation
|
|
|
|
|
|
|
|
|
12 Months Ended
September 30, 2018
(Unaudited)
|
All figures in
thousands
|
As Reported*
in Euro
|
|
Converted to
USD **
|
Net sales
|
€ 333,723
|
|
$380,444
|
Gross profit
***
|
162,168
|
|
184,871
|
% of sales
|
48.6%
|
|
48.6%
|
Operating expenses
***
|
130,258
|
|
148,494
|
Income from
operations
|
31,910
|
|
36,377
|
Interest
expense
|
15,713
|
|
17,913
|
Income (loss) before
income taxes
|
16,196
|
|
18,464
|
Income
taxes
|
6,898
|
|
7,864
|
Net
Income
|
€
9,298
|
|
$10,600
|
Interest
expense
|
15,713
|
|
17,913
|
Income tax
expense
|
6,894
|
|
7,860
|
Depreciation and
amortization expense
|
8,593
|
|
9,796
|
EBITDA
|
€ 40,499
|
|
$46,169
|
Estimated difference
in product costs using current Euro/USD FX rate ****
|
(5,361)
|
|
(6,112)
|
Adjusted
EBITDA
|
€
35,138
|
|
$40,057
|
|
|
|
|
* As reported per
IFRS standards
|
** USD figures
converted at assumed EUR/USD conversion rate of 1.14
|
*** Distribution
expenses reclassified from Operating Expenses to
COGS
|
**** A significant
portion of product cost is purchased in USD. This adjustment
represents a restatement of those purchases at 1.14 Euro/USD spot
rate as compared to actual rates at the time of
purchase.
|
|
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SOURCE Callaway Golf Company