Attached files

file filename
8-K - 8-K - Centric Brands Inc.a15-19727_18k.htm
EX-10.2 - EX-10.2 - Centric Brands Inc.a15-19727_1ex10d2.htm
EX-10.1 - EX-10.1 - Centric Brands Inc.a15-19727_1ex10d1.htm
EX-10.3 - EX-10.3 - Centric Brands Inc.a15-19727_1ex10d3.htm

Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS) AND COMPREHENESIVE INCOME (LOSS)

 

The unaudited pro forma condensed consolidated balance sheet as of May 31, 2015 gives effect to the sale of certain operating and intellectual property assets of Joe Jeans Inc. related to the Joe’s® brand and business (the “Asset Sale”) as if the transaction occurred on May 31, 2015.  The unaudited pro forma condensed consolidated statements of net income (loss) and comprehensive income (loss) for the years ended November 30, 2014, 2013 and 2012 and six months ended May 31, 2015 give effect to the Asset Sale as if it had been completed as of December 1, 2011.

 

The unaudited pro forma condensed consolidated statements of net loss and comprehensive loss and unaudited pro forma condensed consolidated balance sheet were derived by adjusting our historical consolidated financial statements, which include the results of the assets subject to the Asset Sale.  The unaudited pro forma condensed consolidated balance sheet and condensed consolidated statements of net income (loss) and comprehensive income (loss) are provided for informational purposes only and should not be construed to be indicative of our consolidated financial position or results of operations had the transaction been consummated on the date assumed and do not project our consolidated financial position or results of operations for any future period or date.

 

The unaudited pro forma condensed consolidated balance sheet and condensed consolidated statements of net income (loss) and comprehensive income (loss) and accompanying notes should be read in conjunction with our historical consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended November 30, 2014 and our Quarterly Report on Form 10-Q for the period ended May 31, 2015.

 



 

JOE’S JEANS INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MAY 31, 2015

(in thousands)

 

 

 

Historical

 

Pro Forma
Disposition

 

Pro Forma

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

828

 

$

 (c)

$

828

 

Accounts receivable, net

 

1,408

 

(946

) (a)

462

 

Factored accounts receivable, net

 

20,129

 

(11,055

) (a)

9,074

 

Inventories, net

 

48,579

 

(31,410

) (a)

17,169

 

Deferred income taxes, net

 

1,509

 

 

1,509

 

Prepaid expenses and other current assets

 

2,081

 

(354

) (a)

1,727

 

Total current assets

 

74,534

 

(43,765

)

30,769

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

4,580

 

(1,862

) (a)

2,718

 

Goodwill

 

12,230

 

(3,836

) (b)

8,394

 

Intangible assets

 

79,606

 

(24,000

) (b)

55,606

 

Deferred financing costs

 

1,400

 

(1,400

) (d)

 

Other assets

 

1,102

 

(218

) (a)

884

 

 

 

 

 

 

 

 

 

Total assets

 

$

173,452

 

$

(75,081

)

$

98,371

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

16,064

 

$

(5,377

) (a) (d) (e)

$

10,687

 

Income taxes payable

 

 

7,000

 (f)

7,000

 

Buy-out payable

 

3,277

 

 

 

3,277

 

Line of credit

 

20,820

 

(15,780

) (e)

5,040

 

Short-term debt

 

59,123

 

(59,123

) (d) (e)

 

Total current liabilities

 

99,284

 

(73,280

)

26,004

 

 

 

 

 

 

 

 

 

Convertible notes

 

26,078

 

 

26,078

 

Deferred income taxes, net

 

27,690

 

(2,154

) (f)

25,536

 

Deferred rent

 

3,001

 

(60

) (a)

2,941

 

Other liabilities

 

643

 

(250

) (e)

393

 

Total liabilities

 

156,696

 

(75,744

)

80,952

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

16,756

 

663

 

17,419

 

 

 

 

 

 

 

 

 

Total liaibilties and stockholders’ equity

 

$

173,452

 

$

(75,081

)

$

98,371

 

 

The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Consolidated Balance Sheet.

 

2



 

JOE’S JEANS INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

 

INTRODUCTION

 

On September 11, 2015, Joe’s Jeans Inc., a Delaware corporation (the “Company”) completed the previously disclosed Asset Sale of (i) certain of its intellectual property assets used or held for use in the Company’s business operated under the brand names “Joe’s Jeans,” Joe’s,” “Joe’s JD” and “else” (the “Joe’s Business”) for an aggregate purchase price of $67 million, pursuant to the Asset Purchase Agreement, dated September 8, 2015 (the “IP Asset Purchase Agreement”), by and among the Company, Joe’s Holdings LLC, a Delaware limited liability company (“IP Assets Purchaser”), and solely for the purposes of its related guarantee, Sequential Brands Group, Inc., a Delaware corporation, and (ii) among other things, certain inventory and other assets and liabilities related to the Joe’s Business for an aggregate purchase price of $13 million, pursuant to the Asset Purchase Agreement, dated September 8, 2015 (the “Operating Asset Purchase Agreement”), by and among the Company and GBG USA Inc., a Delaware corporation (“Operating Assets Purchaser”). The proceeds of the Asset Sale were used to repay all of the Company’s indebtedness outstanding under its term loan credit agreement with Garrison Loan Agency Service LLC and a portion of the Company’s indebtedness outstanding under its revolving credit agreement with CIT Commercial Services, Inc., a unit of CIT Group (the “Existing Indebtedness”).

 

PRO FORMA ADJUSTMENTS

 

(a)           Operating Assets Purchaser purchased the right to all inventory, pre-paid expenses, security deposits, certain leases and all tangible property located therein, including certain retail store leases, the operation of the e-commerce website, and accounts payable, all of which are related to the operation of the Joe’s Business.

 

(b)           IP Assets Purchaser purchased certain intellectual property assets used or held for use in the Joe’s Business.

 

(c)           Represents a zero balance on net proceeds from the total purchase price from the Operating Assets Purchaser and the IP Assets Purchaser after giving effect to paying the Existing Indebtedness and fees detailed in (d) below.

 

(d)           Represents the estimated closing costs related to the Asset Sale including (i) transaction fees of $600,000;  (ii) forbearance fees of $1,259,000; (iii) acceleration of term loan original issue discount of $803,000; (iv) prepayment penalty fees of $1,400,000; and (v) expense related to deferred financing fees of $1,400,000.

 

(e)           Represents the use of proceeds from the Asset Sale to (i) repay the Existing Indebtedness; (ii) closing costs described in (d) above; and (iii) accrued payroll and other benefits for the Company’s employees subsequently hired by the Operating Assets Purchaser.

 

(f)            Represents the estimated tax liability of $7,000,000 from the gain on the Asset Sale pursuant to the IP Assets Purchase Agreement.  This includes the expected impact of the Asset Sale on the deferred taxes totaling $2,154,000, which includes the reversal of the Joe’s trademark deferred tax liability.

 

3



 

JOE’S JEANS INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

FOR THE SIX MONTHS ENDED MAY 31, 2015

(in thousands, except per share data)

 

 

 

Historical

 

Pro Forma
Disposition

 

Pro Forma

 

 

 

 

 

 

 

 

 

Net sales

 

$

90,246

 

$

(47,844

) (g)

$

42,402

 

Cost of goods sold

 

52,753

 

(28,105

) (g) 

24,648

 

Gross profit

 

37,493

 

(19,739

)

17,754

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Selling, general and administrative

 

38,102

 

(15,703

) (g)

22,399

 

Depreciation and amortization

 

2,008

 

(359

) (g) 

1,649

 

 

 

40,110

 

(16,062

)

24,048

 

Operating loss

 

(2,617

)

(3,677

)

(6,294

)

Interest expense

 

7,828

 

(4,882

) (h) 

2,946

 

Loss before provision for taxes

 

(10,445

)

1,205

 

(9,240

)

Income tax expense (benefit)

 

14,499

 

(18,161

) (i) 

(3,662

)

Net loss and comprehensive loss

 

$

(24,944

)

$

19,366

 

$

(5,578

)

 

 

 

 

 

 

 

 

Loss per common share - basic

 

$

(0.36

)

 

 

$

(0.08

)

 

 

 

 

 

 

 

 

Loss per common share - diluted

 

$

(0.36

)

 

 

$

(0.08

)

 

 

 

 

 

 

 

 

Basic

 

69,139

 

 

 

69,139

 

Diluted

 

69,139

 

 

 

69,139

 

 

The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss).

 

4



 

JOE’S JEANS INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEAR ENDED NOVEMBER 30, 2014

(in thousands, except per share data)

 

 

 

Historical

 

Pro Forma
Disposition

 

Pro Forma

 

 

 

 

 

 

 

 

 

Net sales

 

$

188,755

 

$

(104,531

) (g)

$

84,224

 

Cost of goods sold

 

104,109

 

(59,606

) (g) 

44,503

 

Gross profit

 

84,646

 

(44,925

)

39,721

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Selling, general and administrative

 

76,393

 

(38,852

) (g)

37,541

 

Impairment of goodwill

 

23,585

 

 

23,585

 

Depreciation and amortization

 

4,615

 

(978

) (g)

3,637

 

Retail stores impairment

 

840

 

 

840

 

 

 

105,433

 

(39,830

)

65,603

 

Operating loss

 

(20,787

)

(5,095

)

(25,882

)

Interest expense

 

13,827

 

(8,735

) (h)

5,092

 

Other expense/(income)

 

(2,268

)

 

(2,268

)

Loss before provision for taxes

 

(32,346

)

3,640

 

(28,706

)

Income tax expense (benefit)

 

(4,630

)

151

(i) 

(4,479

)

Net loss and comprehensive loss

 

$

(27,716

)

$

3,489

 

$

(24,227

)

 

 

 

 

 

 

 

 

Loss per common share - basic

 

$

(0.41

)

 

 

$

(0.36

)

 

 

 

 

 

 

 

 

Loss per common share - diluted

 

$

(0.41

)

 

 

$

(0.36

)

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic

 

68,226

 

 

 

68,226

 

Diluted

 

68,226

 

 

 

68,226

 

 

The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss).

 

5



 

JOE’S JEANS INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEAR ENDED NOVEMBER 30, 2013

(in thousands, except per share data)

 

 

 

Historical

 

Pro Forma
Disposition

 

Pro Forma

 

 

 

 

 

 

 

 

 

Net sales

 

$

140,183

 

$

(111,766

) (g)

$

28,417

 

Cost of goods sold

 

77,844

 

(63,394

) (g) 

14,450

 

Gross profit

 

62,339

 

(48,372

)

13,967

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Selling, general and administrative

 

54,126

 

(48,803

) (g)

5,323

 

Depreciation and amortization

 

2,541

 

(1,222

) (g)

1,319

 

Contingent consideeration buy-out expense

 

8,732

 

 

8,732

 

 

 

65,399

 

(50,025

)

15,374

 

Operating loss

 

(3,060

)

1,653

 

(1,407

)

Interest expense

 

2,562

 

(1,365

) (h)

1,197

 

Other expense/(income)

 

209

 

 

209

 

Loss before provision for taxes

 

(5,831

)

3,018

 

(2,813

)

Income tax expense (benefit)

 

1,483

 

(2,563

) (i) 

(1,080

)

Net loss and comprehensive loss

 

$

(7,314

)

$

5,581

 

$

(1,733

)

 

 

 

 

 

 

 

 

Loss per common share - basic

 

$

(0.11

)

 

 

$

(0.03

)

 

 

 

 

 

 

 

 

Loss per common share - diluted

 

$

(0.11

)

 

 

$

(0.03

)

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic

 

67,163

 

 

 

67,163

 

Diluted

 

67,163

 

 

 

67,163

 

 

The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss).

 

6



 

JOE’S JEANS INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEAR ENDED NOVEMBER 30, 2012

(in thousands, except per share data)

 

 

 

Historical

 

Pro Forma
Disposition

 

Pro Forma

 

 

 

 

 

 

 

 

 

Net sales

 

$

118,642

 

$

(109,158

) (g)

$

9,484

 

Cost of goods sold

 

62,472

 

(59,637

) (g) 

2,835

 

Gross profit

 

56,170

 

(49,521

)

6,649

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Selling, general and administrative

 

43,997

 

(37,163

) (g)

6,834

 

Depreciation and amortization

 

1,456

 

(891

) (g) 

565

 

 

 

45,453

 

(38,054

)

7,399

 

Operating income (loss)

 

10,717

 

(11,467

)

(750

)

Interest expense

 

376

 

(346

) (h) 

30

 

Income (loss) before provision for taxes

 

10,341

 

(11,121

)

(780

)

Income tax expense (benefit)

 

4,776

 

(5,086

) (i) 

(310

)

Net income (loss) and comprehensive income (loss)

 

$

5,565

 

$

(6,035

)

$

(470

)

 

 

 

 

 

 

 

 

Earnings (loss) per common share - basic

 

$

0.08

 

 

 

$

(0.01

)

 

 

 

 

 

 

 

 

Earnings (loss) per common share - diluted

 

$

0.08

 

 

 

$

(0.01

)

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic

 

65,496

 

 

 

65,496

 

Diluted

 

66,849

 

 

 

66,849

 

 

The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss).

 

7



 

JOE’S JEANS INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE SIX MONTHS ENDED MAY 31, 2015 AND FOR THE YEARS ENDED NOVEMBER 30, 2014, 2013, AND 2012

 

PRO FORMA ADJUSTMENTS

 

(g)           Represents direct historical revenue and expenses associated with the operation of the Company’s Joe’s Business and certain retail stores included in the Asset Sale for the period.

 

(h)           Represents the interest expense that has been eliminated as a result of the repayment of the Existing Indebtedness.

 

(i)            Represents the removal of the tax expense that is not related to the Company’s remaining operations after giving effect to the Asset Sale.  The tax expense (benefit) was calculated based upon statutory tax rates. The pro forma adjustment to the tax expense for the period ended May 31, 2015 includes $15,007,000 of expense associated with the valuation allowance established during the first quarter of fiscal 2015 and other tax items not associated with the Company’s remaining operations after giving effect to the Asset Sale.

 

8