EX-99.3 4 a07-4837_1ex99d3.htm EX-99.3

 

EXHIBIT 99.3

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On December 1, 2006, Crocs, Inc. (the “Company”) completed its previously announced acquisition of 100% of the membership interests of Jibbitz, LLC, a Colorado limited liability company (“Jibbitz”), for $10 million in cash. The cash purchase price is subject to adjustment based on the closing date balance sheet of Jibbitz.  The Company also paid off approximately $3.2 million in accrued liabilities of Jibbitz at the closing.  The membership interests of Jibbitz were acquired pursuant to a membership interest purchase agreement (the “Agreement”) by and among the Company and the members of Jibbitz dated September 29, 2006. The Agreement also provides for potential earn-out consideration for the former Jibbitz members of up to an additional $10 million based on Jibbitz’s earnings before interest and taxes over the three years following the closing of the acquisition. The unaudited pro forma condensed consolidated balance sheet reflects the pro forma balance sheet of the Company as if the acquisition had occurred as of September 30, 2006. The unaudited pro forma condensed consolidated statements of operations of the Company’s for the year ended December 31, 2005 and nine months ended September 30, 2006 gives pro forma effect to the acquisition as if it had occurred at the inception of Jibbitz (August 2, 2005). The purchase price allocation presented herein is preliminary; accordingly, the actual purchase accounting adjustments may differ from the pro forma adjustments reflected herein.

The unaudited pro forma condensed consolidated financial statements do not purport to represent what our actual results of operations would have been had the acquisition occurred on the dates indicated or for any future period or date. The unaudited pro forma condensed consolidated financial statements have been prepared for illustrative purposes only. The pro forma adjustments give effect to available information and assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated balance sheets and statements of operations should be read in conjunction with Crocs’ historical financial statements and related notes, as well as “Selected Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s previously filed Annual Reports on Form 10-K for the year ended December 31, 2005 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.



 

CROCS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2006

(In thousands)

 

 

Historical

 

Pro Forma

 

Pro Forma

 

 

 

Crocs, Inc.

 

Jibbitz, LLC

 

Adjustments

 

Crocs, Inc.

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

57,880

 

$

520

 

$

(10,575

)(a)

$

47,825

 

Short-term investments

 

25,400

 

—

 

—

 

25,400

 

Accounts receivable—net

 

60,651

 

536

 

(4

)(b)

61,183

 

Inventories

 

49,128

 

1,534

 

—

 

50,662

 

Deferred tax assets

 

1,636

 

—

 

2

 (c)

1,638

 

Prepaid expenses and other current assets

 

10,233

 

169

 

(92

)(d)

10,310

 

Total current assets

 

204,928

 

2,759

 

(10,669

)

197,018

 

Property and equipment—net

 

24,713

 

214

 

—

 

24,927

 

Goodwill

 

350

 

—

 

6,833

 (e)

7,183

 

Intangible assets—net

 

8,106

 

209

 

1,461

 (f)

9,776

 

Deferred tax assets

 

1,532

 

—

 

—

 

1,532

 

Other assets

 

902

 

4

 

(4

)(g)

902

 

Total assets

 

$

240,531

 

$

3,186

 

$

(2,379

)

$

241,338

 

LIABILITIES AND STOCKHOLDERS’/MEMBERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

30,459

 

$

683

 

$

(177

)(b)

$

30,965

 

Accrued expenses and other current liabilities

 

21,716

 

199

 

102

 (a)

22,017

 

Income taxes payable

 

6,424

 

—

 

—

 

6,424

 

Note payable, line of credit, and current portion of long-term debt and capital lease obligations

 

817

 

575

 

(575

)(g)

817

 

Total current liabilities

 

59,416

 

1,457

 

(650

)

60,223

 

Long-term debt and capital lease obligations, net of current portion

 

1,550

 

—

 

—

 

1,550

 

Deferred tax liabilities

 

1,880

 

—

 

—

 

1,880

 

Other liabilities

 

260

 

—

 

—

 

260

 

Total liabilities

 

63,106

 

1,457

 

(650

)

63,913

 

Stockholders’/members’ equity

 

177,425

 

1,729

 

(1,729

)(h)

177,425

 

Total

 

$

240,531

 

$

3,186

 

$

(2,379

)

$

241,338

 

See notes to unaudited pro forma condensed consolidated financial statements.



 

CROCS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2005

(In thousands, except share and per share data)

 

 

Historical

 

Pro Forma

 

Pro Forma

 

 

 

Crocs, Inc.

 

Jibbitz, LLC(1)

 

Adjustments

 

Crocs, Inc.

 

Revenues

 

$

108,581

 

$

111

 

$

—

 

$

108,692

 

Cost of sales

 

47,773

 

73

 

14

 (d)

47,860

 

Gross profit

 

60,808

 

38

 

(14

)

60,832

 

Selling, general and administrative expenses

 

33,916

 

52

 

495

 (f)

34,463

 

Income (loss) from operations

 

26,892

 

(14

)

(509

)

26,369

 

Interest expense

 

611

 

2

 

(2

)(g)

611

 

Other (income)—net

 

(8

)

—

 

—

 

(8

)

Income (loss) before income taxes

 

26,289

 

(16

)

(507

)

25,766

 

Income tax expense (benefit)

 

9,317

 

—

 

(186

)(c)

9,131

 

Net income (loss)

 

16,972

 

(16

)

(321

)

16,635

 

Dividends on redeemable convertible preferred shares

 

275

 

—

 

—

 

275

 

Net income (loss) attributable to common stockholders

 

$

16,697

 

$

(16

)

$

(321

)

$

16,360

 

Income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.51

 

 

 

 

 

$

0.49

 

Diluted

 

$

0.51

 

 

 

 

 

$

0.49

 

Weighted average common shares:

 

 

 

 

 

 

 

 

 

Basic

 

25,493,577

 

 

 

 

 

25,493,577

 

Diluted

 

33,570,000

 

 

 

 

 

33,570,000

 

(1)               For the period from Inception (August 2, 2005) through December 31, 2005.

See notes to unaudited pro forma condensed consolidated financial statements.



 

CROCS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2006

(In thousands, except share and per share data)

 

 

Historical

 

Pro Forma

 

Pro Forma

 

 

 

Crocs, Inc.

 

Jibbitz, LLC

 

Adjustments

 

Crocs, Inc.

 

Revenues

 

$

241,824

 

$

8,275

 

$

(32

)(b)

$

250,067

 

Cost of sales

 

106,348

 

2,549

 

46

(b)(d)

108,943

 

Gross profit

 

135,476

 

5,726

 

(78

)

141,124

 

Selling, general and administrative expenses

 

70,345

 

2,168

 

548

(b)(f)

73,061

 

Income from operations

 

65,131

 

3,558

 

(626

)

68,063

 

Interest expense

 

533

 

32

 

(32

)(g)

533

 

Other (income)—net

 

(1,310

)

—

 

—

 

(1,310

)

Income before income taxes

 

65,908

 

3,526

 

(594

)

68,840

 

Income tax expense

 

22,275

 

—

 

993

(c)

23,268

 

Net income

 

43,633

 

3,526

 

(1,587

)

45,572

 

Dividends on redeemable convertible preferred shares

 

33

 

—

 

—

 

33

 

Net income attributable to common stockholders

 

$

43,600

 

$

3,526

 

$

(1,587

)

$

45,539

 

Income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

1.19

 

 

 

 

 

$

1.24

 

Diluted

 

$

1.10

 

 

 

 

 

$

1.15

 

Weighted average common shares:

 

 

 

 

 

 

 

 

 

Basic

 

36,675,319

 

 

 

 

 

36,675,319

 

Diluted

 

39,726,845

 

 

 

 

 

39,726,845

 

See notes to unaudited pro forma condensed consolidated financial statements.



 

CROCS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.                   Basis of Presentation

The following unaudited pro forma condensed consolidated financial statements are based on the historical financial statements of Crocs, Inc. (“the Company”) and Jibbitz, LLC. (“Jibbitz”) after giving effect to the acquisition under the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the unaudited pro forma condensed consolidated financial information.

The unaudited pro forma condensed consolidated balance sheet reflects the unaudited pro forma condensed consolidated balance sheet of the Company as if the acquisition had occurred as of September 30, 2006. The unaudited pro forma condensed consolidated statements of operations of the Company for the year ended December 31, 2005 and nine months ended September 30, 2006 are presented to show the effects of the acquisition as if it had occurred at the inception of Jibbitz (August 2, 2005).

The unaudited pro forma condensed consolidated financial statements do not purport to represent what our actual results of operations would have been had the acquisition occurred on the dates indicated or for any future period or date. The pro forma adjustments give effect to available information and assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated balance sheets and statements of operations should be read in conjunction with the Company’s historical financial statements and related notes, as well as “Selected Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2006 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

Under business combination accounting, the total preliminary purchase price will be allocated to Jibbitz’s assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the assets acquired and liabilities assumed is recorded as goodwill. The preliminary allocation of the purchase price used in the unaudited pro forma condensed consolidated balance sheet is based on a preliminary valuation as if the acquisition occurred on September 30, 2006. The estimated fair values of identifiable intangibles assets have been determined with the assistance of an independent third-party valuation firm and such firm’s preliminary work. The Company’s estimates and assumptions are subject to change upon the finalization of the valuation.

The purchase price allocation presented herein is preliminary; accordingly, the actual purchase accounting adjustments may differ from the pro forma adjustments reflected herein. Except for adjustments to identified intangible assets, assets and liabilities were valued at their respective carrying amounts, as the Company’s management believes that these amounts approximate their current fair values.

Based on a preliminary valuation, the total preliminary purchase price that would have been allocated to assets acquired and liabilities assumed if the acquisition had occurred on September 30, 2006 is as follows (in thousands) :

Working capital

 

1,960

 

Property, plant, and equipment

 

214

 

Identified intangible assets

 

1,670

 

Goodwill

 

6,833

 

Total preliminary purchase price

 

$

10,677

 

 



 

2.                   Pro Forma Adjustments

The pro forma adjustments included in the unaudited pro forma condensed consolidated financial statements are as follows (in thousands):

(a)               Adjustments to cash and accrued liabilities to record the preliminary purchase price. Amounts are included for cash consideration paid and accrued liabilities for direct costs of the acquisition.

Purchase price

 

$

(10,000

)

Note payable and line of credit

 

(575

)

Total decrease to cash

 

$

(10,575

)

 

 

 

 

Increase to accrued liabilities

 

$

102

 

(b)            Adjustments to eliminate intercompany transactions.

(c)               Adjustment to deferred tax asset and income tax expense. Prior to the acquisition, Jibbitz was a limited liability company, which passed through all earnings and losses to the members. Prior to the acquisition, Jibbitz had no income tax expense or deferred tax assets or liabilities. Net deferred income taxes include adjustments related to deferred rent and employee vacation accrual.

(d)              Adjustment to prepaid expenses and cost of sales to reflect presentation used by Crocs.

(e)               Adjustment to record the preliminary estimate of goodwill. Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed.

(f)                 Adjustment to reflect the preliminary estimate of the fair value of intangible assets and the resulting increases in amortization expense. The Company determined that the tradenames have an indefinite life; as such, tradenames will not be amortized. Customer relationships are being amortized over the expected revenue stream. The preliminary estimated fair value of identifiable intangible assets was determined based on an independent third-party preliminary valuation.

 

Historical
Amount, Net

 

Preliminary
Fair Value

 

Increase
(Decrease) to
Intangible Assets

 

Tradenames

 

$

78

 

$

150

 

$

72

 

Customer relationships

 

—

 

1,520

 

1,520

 

Other Intangible Assets

 

131

 

—

 

(131

)

Total                                 

 

$

209

 

$

1,670

 

$

1,461

 

 

Net increase to amortization expense for the period ending 12/31/05

 

$

495

 

 

 

 

 

Net increase to amortization expense for the period ending 9/30/06

 

$

721

 

 

(g)              Adjustments to reflect repayment of Jibbitz’s line of credit and note payable and to remove the related debt issuance costs and interest expense.

(h)              Adjustment to eliminate Jibbitz’s historical members’ equity.