A Conversation with Mike Mardy, Former CFO of Tumi

October 20, 2016

      spotify.gif   listen_on_iheartradio_badge.png

CFO Mike Mardy and EisnerAmper's Corporate Tax Group, Partner-in-Charge Michael Hadjiloucas, discuss Tumi's IPO and recent sale and the role EisnerAmper played in Tumi's transition.


Transcript

Dave Plaskow: Welcome to EisnerAmper’s corporate tax podcast, where we speak with thought leaders and newsmakers about relevant issues in corporate taxation. I’m Dave Plaskow and I’ll be your host. Today we’re happy to have Mike Mardy, CFO of Tumi Holdings, and Michael Hadjiloucas, partner in charge of the corporate tax group here at EisnerAmper. Gentlemen welcome and thanks for being here.
Mike Mardy: Thank you.

Michael Hadjiloucas: Thank you.

DP:
Mike, let’s start with you. Tell us a little bit about Tumi and your role during EisnerAmper’s engagement with the company.
MM:So, I, I have been associated with Tumi, or had been associated with Tumi for roughly 15 years. I was hired in 2002 shortly after 9/11 by a private equity firm to be the chief financial officer of Tumi.
DP: Okay.
MM:My role evolved really into where I was not just chief financial officer but kind of functioned as a chief operating officer as many CFOs often do. After 15 years, I started… when I started with Tumi we were doing about $100 million in sales, literally $2 or $3 million of EBITA, we had very, very high levels of debt. If you fast forward to today, and I might add that Tumi was just sold on August 1, to Samsonite who bought Tumi for roughly $2 billion. But Tumi, if… just before we were sold, if you fast forward to today, roughly about $600 million in sales, $150 million of EBITA, no debt, paid off all the debt and in April of 2012 we had gone public, didn’t use any of the proceeds from the public offering to do anything but pay off existing… some existing shareholders. So Tumi’s a really great success story. EisnerAmper very early on became a part of that success story.
DP:For the uninitiated, tell us a little bit about Tumi. What do they do?
MM: A premium lifestyle travel brand.
DP: Okay.
MM: We operate in more than 200 stores all over the world.
DP:When Tumi was going through its transition, through the sale and IPO, what accounting and business advisory services did the company need at the time?
MM:IPO preparedness work, we needed internal control work, we needed tax work, and we needed, really, some good consulting services to help us grow internationally, which is where we we’re growing a lot. One of the reasons why’s Mike is here is we principally have EisnerAmper engaged on the basis of our tax work, and they’ve been very effective – a lot of personal attention on the part of a partner like Mike and his staff, which is what you go to a firm like EisnerAmper for. You get a lot of personal attention. You get an answer to a question almost immediately. When we were in the process of preparing for a public offering, we were using another firm to do our audit. The folks both at the board level and the folks with the bank that helped take us public were concerned about using a Big 4 firm, and I pushed back on that because we weren’t using a Big 4 firm for our tax work and for our internal control work because there was a limited amount of dollars you could spend.

DP:Sure.
MM:We got just the same type of service as we would have from a Big 4 firm in these other arenas. If you tried to spread the consulting services around in a way that made sense for us, and knowing some of the folks at EisnerAmper to come in and do some of our tax work for us – not just the planning work but the compliance work, the filings and, frankly, that whole suite of consultants at your disposal was really the most effective way for the business to operate. We have been very, very happy with the work that EisnerAmper has done for us.
DP:Ok. Good. Michael, let’s bring you into the conversation.
MH: Hi Dave.
DP:Walk us through what you and your team did for the folks at Tumi.
MH: Yeah. First of all, let me give you some information about Tumi, numbers wise.
DP: Okay.
MH: We got engaged around 2011. The company had about $330 million of sales and over the years, through 2015, there were about $550 million in sales. Their effective tax rate went from 54% to 35%.
DP: Wow.
MH: EisnerAmper was engaged in late 2011 with regard to the corporate tax revision and disclosures of taxes within the financial statements. So, once we got engaged that was our primary goal – to help them with certain tax footnotes and certain tax revisions, the balance sheet classification of deferred taxes. We dealt with domestic and international issues. I remember specifically dealing with executed compensation and stock options. One of the things that I remember very clearly was the Sunday before the IPO, I got a phone call from Peter around 6:00 because Michael had a problem because our auditors were questioning debt to equity— there’s certain issues between debt versus equity on our balance sheet and wouldn’t understand the tax consequences of that. So at that time, Sunday, I spoke with the audit partner of the other accounting firm. I spoke with the tax partner of the other audit firm. I explained to them the tax rules and at the end of the day we provided a memo to them that helped address that issue. That was not a significant issue but an issue that came up the last minute that we were able to help them with.
DP:That’s a customer service issue.
MH: On a Sunday afternoon.
MM:Absolutely. And as I’ve said, that’s one of the great things about dealing with a firm like EisnerAmper and guys like Mike, who are ready, willing and able to help, even if it’s on Thanksgiving.
DP: Michael, any other issues and challenges you ran up against?
MH: Yes. So after we assisted Tumi with their IPO process, we became the outsource tax department. Anything tax they needed they would call us.
DP: Yup.
MH: So we helped significantly lower their effective tax rate. We dealt with executed compensation issues, stock options. One of the things I remember dealing with is the foreign tax utilization. They have significant foreign taxes that we were able to utilize here in the U.S, help them with setting up new companies, some parts of due diligence.
DP: Yup.
MH: We also helped with all of the other things that deal with any basic audit, whether it was IRS or state sales tax issues that came up. We dealt with all of the basic issues, but most importantly we helped them understand, early on, what their effective tax rate is and what the industry standards were. I remember meeting with Mike and laying out certain planning ideas that they could do.
DP: Mike, you had mentioned earlier that when you’re doing an IPO, there are many moving parts. When all the dust settled, the sale, the IPO, how did everything work out?
MM:So I think it was a very successful IPO.
DP: And what would you say to someone who’s considering using EisnerAmper as a business advisor?
MM: I would say that EisnerAmper does a lot of things that you can’t get done more efficiently by another type of firm. EisnerAmper has a wealth management company, they have a stock benefit company, they do employee benefit audits, they do full-fledged audits, they have an SEC practice. And that is the kind of firm, if you’re a medium-sized company or even a small company, you want to latch onto, and EisnerAmper has done some expansion over the past few years, which I think has enhanced their capabilities to perform those services for even bigger clients, ones with operations in a multiplicity of areas including overseas. I think it’s money well spent. When I view my current audit assignment and my other potentially future audit assignments, I look for that kind of service level for that kind of cost. That’s the first place you look, and I think EisnerAmper is a great place to go to for that. You have very capable, quality people.
DP: Gentlemen, thank you for sharing your insights.

About Michael Hadjiloucas

Michael Hadjiloucas has expertise in both domestic and international corporate tax, entity formation, acquisitions, reorganization and due diligence, and partnership transactions, inbound and outbound transactions, and taxation of foreign entities.

* Required