G-iii Apparel Group, Ltd. · NASDAQ:GIII
G-iii Apparel — Debt Investor Presentation (September 2016)
46 slides from G-iii Apparel's debt investor presentation, Sep 9, 2016
Slide 1: Public Lender Presentation September 2016
G - III Public Lender Presentation September 2016
Slide 2: Disclaimer / Forward Looking Statements
Disclaimer / Forward Looking Statements G - III Apparel Group, Ltd. (together with its direct and indirect subsidiaries, “G - III”) has represented that the information con tained in this presentation is either (i) publicly available, or (ii) is not material non - public information (within the mean
Slide 3: Presenters
Presenters Morris Goldfarb Chief Executive Officer, President and Chairman of the Board Wayne Miller Chief Operating Officer Neal Nackman Chief Financial Officer 2
Slide 4: Agenda
Agenda 1. Transaction Overview: Barclays 2. G - III Company Overview: Morris Goldfarb 3. G - III Credit Highlights: Wayne Miller 4. Strategic Rationale: Wayne Miller 5. Financial Overview: Neal Nackman 6. Syndication Overview: Barclays 7. Appendix
Slide 5: Transaction Overview
Transaction Overview
Slide 6: Transaction Overview
Transaction Overview Transaction G - III Apparel Group, Ltd. (“G - III” or the "Company") (NASDAQ: GIII) is a leading designer, manufacturer and marketer of an extensive range of apparel and accessories On July 25, 2016, G - III announced that it had entered into an agreement to acquire Donna Karan
Slide 7: Sources & Uses and Pro Forma Capitalization
Sources & Uses and Pro Forma Capitalization Sources & Uses Pro Forma Capitalization ___________________________ Source: Company filings and management info. 1. Reflects average cash balance and ABL draw of the last four quarters and LTM Q2 7/31/16 operating data. 2. Reflects pro forma adjustments to
Slide 8: Key Credit Highlights & Strategic Rationale
Key Credit Highlights & Strategic Rationale Broad portfolio of Company owned brands and recognized brands through exceptional relationships with licensors Proven ability to grow both existing and new categories for brands, including Calvin Klein, Tommy Hilfiger, Karl Lagerfeld and others Longstandin
Slide 9: Company Overview
G - III Company Overview
Slide 10: G-III: A 60-Year History
G - III: A 60 - Year History 1956 Founded by Aron Goldfarb in New York City as a leather outerwear company 1974 Morris Goldfarb joined G - III as Chief Executive Officer and spearheaded the expansion of the Company’s international sourcing capabilities, becoming one of the first companies to import
Slide 11: G-III: 2015 Snapshot
G - III: 2015 Snapshot Retail Wholesale Net Sales: $514mm # of Brands: 4 Licensed Owned Brands Royalties Net Sales: $1,950mm (1) # of Fashion Brands: 17 # of Team Sport Brands: 9 # of Brands: 11 # of Brands: 4 ___________________________ 1. Reflects net sales before intercompany eliminations. 7
Slide 12: Overview of Wholesale Business
Overview of Wholesale Business Segment Description Wholesale Net Sales Breakdown (1) Includes sales from products licensed by the Company from third parties, proprietary brands and private labels Products sold through a cross section of leading retailers including: Macy’s Bloomingdale’s Nordstrom Lo
Slide 13: Overview of Retail Business and Vilebrequin
Overview of Retail Business and Vilebrequin Retail and Vilebrequin Description Retail: Operates 357 stores in 43 states and Puerto Rico, consisting of: Wilsons Leather (189 stores): (substantially outlet) averaging ~3,715 sq. ft.; primarily sells men’s and woman’s outerwear and accessories G.H. Bass
Slide 14: Credit Highlights
G - III Credit Highlights
Slide 15: Credit Highlights
G - III Credit Highlights Broad portfolio of Company owned brands and recognized brands through exceptional relationships with licensors Proven ability to grow both existing and new categories for brands, including Calvin Klein, Tommy Hilfiger, Karl Lagerfeld and others Longstanding, mutually benefi
Slide 16: Broad Portfolio of Recognized Brands Through Exceptional Relationships with Licensors
Broad Portfolio of Recognized Brands Through Exceptional Relationships with Licensors 1 In an environment of rapidly changing consumer fashion trends, G - III benefits from a balanced mix of well - established and newer brands G - III has selectively added licensing rights to premier brands in women
Slide 17: Proven Ability to Grow Existing and New Categories
Proven Ability to Grow Existing and New Categories 2 2011 – 2015 Net Sales Breakdown $572 $667 $242 $95 $414 $192 $412 $657 $247 $439 $170 $581 $1,231 $2,344 2011 Outerwear Sportswear & Other Dresses Retail 2015 Outerwear Sportswear & Other Dresses Retail Outerwear 46% Sportswear & Other 20% Dresses
Slide 18: Calvin Klein Case Study: Tremendous Execution Over 10+ Years
Calvin Klein Case Study: Tremendous Execution Over 10+ Years 2 2004 – 2016E Calvin Klein Sales and License Agreements ($ in millions) $35 ~$ 1,000 2004 2016E Outerwear 2005 Suits Sept. 2005 Swimwear April 2013 Dresses Aug. 2006 Performance Dec. 2007 Sportswear Aug. 2008 Handbags, Cold Weather Acc. &
Slide 19: Longstanding, Mutually Beneficial Customer Relationships
Longstanding, Mutually Beneficial Customer Relationships Across a Diversified Distribution Base Penetration of multiple consumer demographic s egments , price p oints and distribution c hannels with products sold to ~2,800 customers Aspirational / Luxury Department Stores Online Media / Television M
Slide 20: Superior Design, Sourcing and Quality Control
Superior Design, Sourcing and Quality Control Sourcing Control Quality Control Superior Design I n - house design and merchandising team designs substantially all of licensed, proprietary and private label products Designers work collaboratively with licensors and private label customers to create d
Slide 21: Strong Historical Business Performance
$38 $37 $62 $103 $92 $114 $146 $187 $210 $203 7.3% 5.1% 7.7% 9.7% 7.5% 8.1% 8.5% 8.8% 9.0% 8.2% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E Strong Historical Business Performance Net Sales ($ in millions) 5 Adjusted EBITDA and Margin ($ in millions) -- 37.1% 12.6% 32.8% 15.8% 13.7% 22.8% 23.2
Slide 22: Demonstrated Track Record of Acquiring, Managing and Integrating Businesses
6 Demonstrated Track Record of Acquiring, Managing and Integrating Businesses 2005 2008 2007 2015 2012 2014 2016 Joint Venture Eight acquisitions, and one joint venture, over the last eleven years – successful in broadening via product offerings, geographic reach and channel diversification Acquired
Slide 23: Demonstrated Track Record of Acquiring, Managing and Integrating Businesses (cont'd)
Demonstrated Track Record of Acquiring, Managing and Integrating Businesses (cont’d) 6 x Adding new categories and brands to diversify G - III’s portfolio is at the heart of its growth strategy G - III has grown from $1.4 billion to $2.5 billion in global sales over the past 5 years and DKI will be
Slide 24: Conservative Financial Policies
Conservative Financial Policies G - III has maintained a conservative financial policy Prudent in its capital distributions to shareholders Policy of retaining earnings to finance growth and development of its business; has yet to pay cash dividends Historically put cash towards growth as opposed to
Slide 25: Experienced Management Team
Experienced Management Team Demonstrated performance through industry cycles Proven track record of delivering strong operating performance through brand - building initiatives and achieving cost savings through increased productivity Successful at acquiring and integrating companies / brands includ
Slide 26: Strategic Rationale
Strategic Rationale
Slide 27: Strategic Rationale
Own a powerful iconic global brand Leverage sourcing and supply chain experience to grow brands via category expansion as a best - in - class U.S. wholesaler Considerable growth opportunities across channels and categories, both in the U.S. and key markets worldwide Significant operating margin oppo
Slide 28: DKI is a Powerful Iconic Global Brand
DKI is a Powerful Iconic Global Brand 1 Donna Karan International has a stable of one of the world’s most iconic portfolios of fashion brands, including Donna Karan, DKNY and DKNY Jeans Designs, sources, markets, retails, and distributes collections of women’s and men’s clothing, sportswear, accesso
Slide 29: DKI is at a Key Inflection Point
DKI is at a Key Inflection Point 1 In September 2014, LVMH announced the appointment of Caroline Brown, former President of Carolina Herrera, effective January 2015 In June 2015, Donna Karan stepped down from her role as Chief Designer and Dao - Yi Chow and Maxwell Osborne of the Public School label
Slide 30: Leverage Sourcing and Supply Chain Experience to Grow via Category Expansion
Leverage Sourcing and Supply Chain Experience to Grow via Category Expansion as a Best - in - Class U.S. Wholesaler 2 Calvin Klein Sales $35 ~$ 1,000 2004 2016E G - III has grown from $1.4 billion to $2.5 billion in global sales over the past 5 years and DKI will be a significant driver in future gr
Slide 31: Considerable Growth Opportunities
Considerable Growth Opportunities 3 x Addition of DKI enables meaningful expansion of wholesale category Significant growth opportunity in North America and around the world Plays to operating strengths of design, sourcing and distribution DKNY alone has the potential to be a billion dollar brand, i
Slide 32: Significant Operating Margin Opportunities at DKI
Significant Operating Margin Opportunities at DKI 4 Expected to be one of the highest margin businesses in the G - III wholesale portfolio Majority of improvement from growing both U.S. and international wholesale businesses to scale Improvement in retail store profitability of go forward outlet and
Slide 33: Preliminary DKI Financial Targets
($10) $55 $105 2017E 2018E 2019E ($ in millions) (3% ) 10% 14% % Margin Preliminary DKI Financial Targets $325 $550 $750 2017E 2018E 2019E ($ in millions) Total Revenues (1) (2) Operating Income (1) ___________________________ Note: Assumes February 1, 2017 transaction close. 1. Reflects fiscal year
Slide 34: Financial Overview
Financial Overview
Slide 35: G-III: Summary Historical Financials
G - III: Summary Historical Financials ___________________________ Source: Company filings. Note: 2016E figures reflect midpoint of public guidance. Historical Net Sales $17 $12 $29 $43 $42 1.4% 0.8% 1.7% 2.0% 1.8% 2011 2012 2013 2014 2015 Capex % of Sales Historical Capital Expenditures $75 $102 $1
Slide 36: G-III: Performance Update
G - III: Performance Update Key Commentary Financial Summary Total net sales decreased $32mm, or 6.7%, in Q2 2016 as compared to Q2 2015 Decline largely a result of weakness in wholesale outerwear and retail sales, partially offset by strength in non - outerwear sales Retail underperformed in Q2 201
Slide 37: G-III: Outlook
G - III: Outlook Key Commentary During Q2 2016, started shipping several categories of Tommy Hilfiger product that will make a meaningful contribution in 2H 2016 S trong bookings for Spring Expanding distribution to wider base of customers and will see more growth, stronger average price points and
Slide 38: Credit Highlights
G - III Credit Highlights Broad portfolio of Company owned brands and recognized brands through exceptional relationships with licensors Proven ability to grow both existing and new categories for brands, including Calvin Klein, Tommy Hilfiger, Karl Lagerfeld and others Longstanding, mutually benefi
Slide 39: Syndication Overview
Syndication Overview
Slide 40: Indicative Terms – Senior Secured Term Loan
Indicative Terms – Senior Secured Term Loan Borrower: G - III Apparel Group, Ltd. (the “Borrower”) Facility Description: $350 million Senior Secured Term Loan Incremental Facilities : $175 million plus an unlimited amount up to 3.25x 1st - Lien Net Leverage subject to 50 bps MFN for 12 months Maturi
Slide 41: Existing vs Proposed ABL Terms and Conditions
Existing terms and conditions Proposed terms and conditions Borrowers: G - III Leather Fashions, Inc. and certain subsidiaries of G - III Apparel Group, LTD. (“Holdings”) All Borrowers under existing with ability to add TBD others (including ability to add foreign subsidiaries) Guarantors: Holdings,
Slide 42: ABL Borrowing Base Terms
Existing terms and conditions Proposed terms and conditions Borrowing Base: 85% of Eligible Accounts Receivable; plus Lesser of (i) 65% of the lower of cost or market and (ii) 85% of NOLV of Eligible Wholesale Inventory; plus Lesser of (i) 70% of the lower of cost or market and (ii) 85% of NOLV of E
Slide 43: Organizational Chart
Organizational Chart G - III Apparel Group, Ltd. (Borrower under the Term Loan and Guarantor under the ABL) Certain Operating Subsidiaries (Borrowers under the ABL and Guarantors under the TL) New Term Loan G - III Leather Fashions, Inc. (Borrower under the ABL and Guarantor under the TL) Foreign Su
Slide 44: Syndication Timeline
Syndication Timeline Date Key Syndication Events 9/16 Bank Meeting 9/30 ABL and Term Loan commitments due 2H 2016 Transaction close and fund Market Holiday September 2016 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Key Syndication Date October 2016
Slide 45: Appendix
Appendix
Slide 46: Historical Adjusted EBITDA Reconciliation
G - III: Historical Adjusted EBITDA Reconciliation Historical Adjusted EBITDA Reconciliation ___________________________ 1. Acquisition expenses reflect expenses associated with the G.H. Bass and Donna Karan acquisitions in the 2013 and LTM Q2 2016 per iods, respectively. ($ in millions) LTM Q2 2013
G III Apparel Group — Debt Investor Presentation (September 2016) on 6ix