Nicklaus Companies

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Nicklaus Companies

11780 U.S. Highway One
North Palm Beach, Florida 33408
U.S.A.
Telephone: (561) 626-3900
Fax: (561) 626-4104
Web site: http://www.nicklaus.com

Private Company
Incorporated: 1970 as Golden Bear International
Employees: 39
Sales: $11.2 million (1999)
NAIC: 71131 Promoter of Performing Arts, Sports, and Similar Events with Facilities; 71141 Agents and Managers for Artists, Athletes, Entertainers, and Other Public Figures; 71391 Golf Courses and Country Clubs; 71399 All Other Amusement and Recreation Industries

Nicklaus Companies is a conglomerate of golf-related businesses run and owned by golfer Jack Nicklaus and his family. The company was formerly named Golden Bear, after Nicklaus’s moniker. It runs the Nicklaus-Flick golf instruction and practice centers, licenses Jack Nicklaus brand clothing and golf accessories, operates the Golden Bear Tour, and consults with a golf course construction firm. The company also handles endorsement deals made by Jack Nicklaus. The company was originally formed as an umbrella for Nicklaus’s many business interests. At one time, the company had as many as 20 subsidiaries, and it was involved in some non-golf-related areas including oil development and radio broadcasting. The company got overextended with debt and was close to bankruptcy in the mid-1980s, then went on to prosper under tighter management. Golden Bear went public in 1996. Its life as a public company was short-lived, however. Accounting fraud at one of its subsidiaries led to a stockholder suit and investigation by the Securities and Exchange Commission. The company was taken private in 2000, and now remains in the hands of Jack Nicklaus and his immediate family.

Company Built on Nicklaus’s Fame

Jack Nicklaus was named Player of the Century in 1988, and is considered to be the greatest golfer in the history of the game. He was born in Columbus, Ohio, in 1940 and began playing golf at the age of ten. He was already a terrific player in his teens, winning the National Jaycee Junior when he was 16. He later attended Ohio State University. Golf interfered with his studies, and he left school to become a professional golfer in 1961. In 1962, he won the U.S. Open, only the first in an impressive string of victories. Nicklaus earned the nickname “Golden Bear,” because he was somewhat bulky and extremely fair-haired. Nicklaus’s agent, Mark McCormack of the Cleveland-based International Management Group, created Golden Bear as a corporate entity to encompass Nicklaus’s business deals. At first the business side of Nicklaus’s career meant mostly endorsements. Nicklaus had left college without a degree, was young, famous, and making money. He concentrated on playing golf and left Golden Bear to his agent to handle. But after a few years, Nicklaus was ready to break with McCormack. McCormack was also the agent for Nicklaus’s arch-rival Arnold Palmer. Palmer was not only a great golfer, but was known as “the people’s choice” for his winning personality. Nicklaus chafed at being handled by Palmer’s manager, and in 1968 he left McCormack.

Golden Bear then found new headquarters in North Palm Beach, Florida, where Nicklaus made his home. Management of the company was taken over by Putnam Pierman, a Columbus native who had known Nicklaus since high school. In 1970, the company incorporated as Golden Bear International Inc. Nicklaus had a longstanding interest in golf course design, and by the mid-1960s he was consulting with top people in the field about courses across the country. Nicklaus began working on a course in Columbus called Muirfield Village around 1967. Pierman, whose family owned an Ohio construction business, was instrumental in getting Muirfield Village off the drawing board. He spearheaded the project and helped Nicklaus manage his growing design consultancy. Along with famed designer Pete Dye, Nicklaus worked on the Harbour Town golf club on Hilton Head Island, South Carolina, in 1968; the John’s Island Club, in Vero Beach, Florida, in 1969; and the Wabeek Golf Club in Bloomfield Hills, Michigan, in 1971. He also co-designed courses with another renowned architect, Desmond Muirhead, creating the Jack Nicklaus Sports Center in Cincinnati, Ohio, in 1971, and the New St. Andrews Golf Club, Ontawara City, Japan, in 1973.

Golf course design was only one arm of Golden Bear. When Pierman took over the company, he instituted a new way of dealing with Nicklaus’s endorsements. Nicklaus had previously never met with people from the companies whose products he endorsed. Pierman had the golfer meet with his endorsement clients and had the different client companies meet all together. This led to fruitful arrangements, such as a Nicklaus commercial for Eastern Airlines with a Pontiac car, another Nicklausendorsed goody, in the background. Nicklaus also lost weight in 1969 and let his hair grow, making him more photogenic. He continued to play incredible golf, winning the British Open in 1970, and then seven more major tournaments over the next five years. Nicklaus was a rising star, and Golden Bear fielded all sorts of business offers. The company bought a Pontiac dealership in Florida, and expanded into several other areas that had nothing to do with golf. These did not always do well. The car dealership, for example, faltered and had to be sold. Yet it made money under its new owner, who had more knowledge of the car business.

Even Nicklaus’s golf-related businesses did not always go smoothly. His reputation as a course designer took off in the 1970s. After co-designing with great names in the field, Nicklaus decided to strike out on his own in 1973. Within only a few months, he had signed contracts to design more than two dozen courses. One of his earliest projects, Muirhead Village, was thought to be one of the best golf courses in the country. Yet Golden Bear only broke even on it, faced with steep construction costs and booming land prices in the surrounding area. Golden Bear was multifaceted, expanding into new and complex businesses, and still run by only a small staff. By 1975, the financial burden of Muirfield Village in particular weighed the company down. That year Nicklaus and Putnam Pierman parted company.

Focusing on Golf Courses in the 1980s

In 1976, Nicklaus hired Charles E. Perry to take over the running of Golden Bear. Perry had been president of Florida International University and also the publisher of Family Weekly magazine. Perry quickly reined in the company, trimming staff and expenses and chucking unprofitable businesses. He focused the company on golf course development. Golden Bear brought in impressive fees for Nicklaus’s design work. The company’s basic design fee was $150,000 for a course in the United States. To design a course abroad, Golden Bear charged $250,000 in an English-speaking country, and $300,000 elsewhere. The company also offered additional services, such as supervising construction of the course, handling maintenance, and running concessions on the course. If the course wanted to use the Jack Nicklaus name and enlist the golfer to do personal promotions, Golden Bear could expect another $1 million. By 1981, Nicklaus had made some $3.6 million playing golf over his career so far. This was a fine figure, but Golden Bear was far more lucrative. The course design projects Golden Bear had going that year were projected to eventually bring in around $300 million.

Nicklaus worked on dozens of courses at once, jetting from one to the other in a private plane. He cut back his competition schedule and typically spent part of every day in the Golden Bear office. Nicklaus had a storied memory and concentration, and he was able to keep details in his head of the many design projects he worked on. But he knew little about real estate, and he left that side of the course development business entirely to Charles Perry. Perry had seen others make money off rising property value in land bordering the Nicklaus courses. His idea was to further expand the design business, and take on the building of residential communities. Perry initiated two major projects in 1979 and 1980. One was Bear Creek, a golf community outside of San Diego. The other was the refurbishing of the St. Andrews Golf Club in Hastings-on-Hudson, New York. St. Andrews was the oldest golf club in the United States, only 30 minutes from Manhattan, but it had fallen into disrepair. Golden Bear planned to revive the course and to build and sell condominium “golf villas” on the course. These were expected to go for around $200,000 for a two-bedroom.

Company Perspectives:

For over 30 years, the mission of the Nicklaus Companies has been to enhance the golf experience, and to bring to the national and international consumer golf-related businesses and services that mirror the high standards established in the career and life of Jack Nicklaus. These services include golf-course design, the development of golf and real estate communities, the marketing and licensing of golf products and services, and event management.

Jack Nicklaus has been involved in the design of 205 courses open for play worldwide, and his thriving business, Nicklaus Design, has 240 courses open for play around the world. Nicklaus Design courses are represented on five continents and in 27 countries and 34 states. Of Nicklaus Design’s worldwide total, 62 of those courses have hosted a combined total of close to 350 professional tournaments. Thirty Nicklaus courses have appeared in various national and international Top-100 lists.

These two projects added a lot of debt to Golden Bear, and neither did as well as planned. Bear Creek was situated almost an hour and a half from San Diego, and that location proved too remote to tempt many buyers. Golden Bear had taken out a loan for $35 million for St. Andrews, and the golf villas did not sell. Nor was this the only thing wrong with the company. When Perry had taken over Golden Bear from Putnam Pierman, he had cut costs and jettisoned businesses Golden Bear did not know how to run, such as the car dealership. But by the mid-1980s, Golden Bear had dozens of subsidiaries. The company ran a restaurant, launched a line of eyewear, operated an investment advice service and a radio station, and developed gas through its Golden Bear Oil & Gas subsidiary. Nicklaus told the Wall Street Journal (January 27, 1987): “We were an accounting nightmare. . . . I didn’t know what any of them did, and neither did anyone else.” Though Nicklaus himself was intensely involved with the design business, he was unable to keep track of the other aspects of his company.

Keeping a Tighter Grip in the 1990s

Golden Bear was severely overextended by 1985. That summer, a new accountant at the company, Dick Bellinger, got together with the firm’s legal counsel and broke the bad news to Nicklaus. The company was facing bankruptcy, and Nicklaus’s personal fortune was also in danger. He had personally guaranteed loans and losses, and it looked like he had to pay up. Nicklaus negotiated with his bankers, and paid some $3 million to settle the ill-fated St. Andrews Golf Club deal. Golden Bear was in debt for about $175 million. Charles Perry insisted that he had a sound long-term business strategy. But Nicklaus was no longer comfortable with Perry’s style. Perry left, and Nicklaus himself took over the top spot of what was now called Golden Bear International, Inc. His number two man became accountant Dick Bellinger. Nicklaus resolved to control the company himself, sticking to golf-related businesses that he had some expertise in.

Golden Bear continued to develop golf communities like Bear Creek, but it only did so when other parties took the financial risk. It took on new subsidiaries, but only in golf-related fields. Nicklaus designed a new putter for MacGregor, a golf company whose clubs he had endorsed since the 1960s. Golden Bear bought the company in 1982 and sold 80 percent of it again in 1986. Nicklaus spent time investigating the company’s manufacturing processes and researched the retail market, eventually bringing MacGregor back to financial health. Nicklaus also looked for new businesses that he could run with less of an investment of his personal time. Nicklaus was 45 when disaster struck his company, and it occurred to him that he needed to find a way to keep Golden Bear going even if he were to retire. So the firm diversified into golf schools, marketing and management of golf tournaments, and golf videos, while it continued to license products and rake in design fees. By 1988, the company’s debt had almost disappeared. Sales were $98 million, with $10 million in profit.

By the early 1990s, Golden Bear had become a conglomerate of golf-related businesses, with only about 30 percent of the business directly dependent on Jack Nicklaus’s daily involvement. In 1993, the company entered a joint venture with Club Corp. International, the leading operator of golf courses, to build about 40 public golf courses around the country. Though these would be Nicklaus-designed courses, they were intended to be less complex to play and maintain as some of Nicklaus’s previous courses. That year Nicklaus also brought out his own line of golf clubs through Golden Bear’s Nicklaus Golf Equipment subsidiary. These were clubs designed for the average golfer, though the price for a set was nevertheless quite steep at around $1,800. Golden Bear seemed to have evolved nicely by the mid-1990s, recovering from its near downfall a decade earlier to bring in around $50 million annually.

Nicklaus and his top executives decided to take part of Golden Bear public in 1996. Other golf companies had done well on the stock market around that time, including Callaway Golf, maker of the popular Big Bertha clubs. The company was split into two parts. Golden Bear International continued as a private company, and comprised the parts of the business that were directly dependent on Jack Nicklaus. The rest of the company went on the NASDAQ exchange August 1, 1996, as Golden Bear Golf, Inc. The public company consisted of six core business areas. These were the Nicklaus-Flick Golf Schools, Nicklaus Apparel, the golf management company Golden Bear Club Services, the Jack Nicklaus International Club, a licensing division for Nicklaus and Golden Bear trademarks, and the golf course building firm Paragon Construction Company. The initial public offering went well, bringing in $36.9 million. Some of this capital went immediately to purchase nine driving ranges, which were to become family-oriented golf practice centers. Nicklaus himself still owned 55 percent of the company.

The public company did well at first, but by 1998 was beset by several problems. Golden Bear had invested in a string of driving ranges, but it was not immediately able to run them profitably. As debt began to mount and Golden Bear’s stock fell, the company sold the nine driving ranges, plus five more it already owned. But worse news followed. The president of Golden Bear’s construction subsidiary, Paragon Construction, resigned in April 1998 after the company posted a loss of $2.7 million for 1997. Under new management, accountants discovered that the loss at Paragon was much graver. The company was actually some $24.7 million in the red. Golden Bear claimed that Paragon’s management had deliberately falsified records and made false statements. The company’s stock was temporarily delisted as outraged stockholders filed suit. The stockholder class-action suit was settled by mid-2000 with a settlement of $3.5 million. Nicklaus lost millions of his personal fortune rectifying problems at Golden Bear; moreover, the company’s stock was completely undermined by the episode. The company bought back its shares at 75 cents apiece, and became a private company again. Its last reported sales were $11.2 million in 1999. Yet a huge chunk of this was profit. Net income was $7.8 million.

Golden Bear changed its name to Nicklaus Companies at the end of 2000. The company continued to license Nicklaus and Golden Bear branded products worldwide. It licensed apparel, leather goods, luggage, eyewear, furniture, artwork, and other items through 15 companies, and distributed these goods in over 25 countries. Its biggest markets were the United States, Japan, and Korea. The company also continued to operate the Nicklaus-Flick golf schools. It handled marketing fees from Jack Nicklaus’s personal product endorsements as well. Nicklaus Companies also maintained a joint venture with Weitz Golf International LLC, a golf course construction company, to market new courses.

Key Dates:

1961:: Jack Nicklaus turns pro.
1970:: Golden Bear International Inc. is incorporated.
1976:: Charles E. Perry is hired to run company.
1985:: The company is dangerously in debt.
1996:: Golden Bear Golf, Inc. is taken public.
2000:: The private and public companies merge as a private entity, which is renamed Nicklaus Companies.