EX-99.4 5 ex994.txt PRO FROMA FINANCIAL INFORMATION Exhibit 99.4 Unaudited Pro Forma Consolidated Financial Statements Introduction The following unaudited pro forma consolidated financial statements give effect to the acquisition by Iconix Brand Group Inc. ("Iconix") in July 2005 of assets of Joe Boxer Company, LLC, a Delaware limited liability company, Joe Boxer Licensing, LLC, a Delaware limited liability company, JBC Canada Holdings, LLC, a Delaware limited liability company, Joe Boxer Canada, LP, a Delaware limited partnership (collectively, "Joe Boxer"), under the purchase method of accounting. These pro forma statements are presented for illustrative purpose only. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable. The pro forma consolidated financial statements do not purport to represent what the results of operations of Iconix's would actually have been if the acquisition had in fact occurred at the beginning of the periods presented, nor do they purport to project the results of operations of Iconix's for any future period. Under the purchase method of accounting, tangible and identifiable intangible assets acquired and liabilities assumed are recorded at their estimated fair values, with the acquired assets being adjusted on a pro rata basis for any excess of the assigned value to the assets acquired and liabilities assumed over the cost of acquisition. The estimated fair values, useful lives and amortization of certain assets acquired are based on a preliminary valuation and are subject to final valuation adjustments. Certain acquired intangible assets were determined to have indefinite useful lives in accordance with FAS 142, thus no amortization has been reflected in the accompanying pro forma consolidated statements of operations. Tests for impairment will be performed at least once a year and impairment charges would be recorded if any. The pro forma condensed balance sheets assume that the acquisition had occurred as of June 30, 2005. The pro forma consolidated statements of operations for the six months ended June 30, 2005 and the 11 months ended December 31, 2004 were prepared by combining Iconix's and Joe Boxer's statements of operations for the same periods, giving effect to the acquisition as though it had occurred at the beginning of each period. The consolidated historical financial statements of Iconix's are derived from the consolidated financial statements included in Iconix's Form 10-K for the 11 months ended December, 2004 and Form 10-Q for the quarter and six months ended June 30, 2005. The historical financial statement of Joe Boxer for the year ended December 31, 2004 is derived from Joe Boxer's audited financial statements included herein and the historical financial statement of Joe Boxer for the six months ended June 30, 2005 is derived from unaudited financial statements included herein. Notes to Unaudited Pro Forma Consolidated Balance Sheets: (a) Reflects the allocation of cost associated with the purchase of Joe Boxer's assets under the purchase method of accounting as though the acquisition occurred on June 30, 2005, and the impact of the financing associated with the acquisition. Total purchase price was determined as follows; Cash paid at closing $ 40,000 Fair value of 4,350,000 shares of common stock at $8.33 per share fair market value per share 36,236 Assumption of K-mart loan, including $3,509 due within 12 months 10,796 Accrued interest 309 Value of warrants issued as a cost of the acquisition 788 Other estimated costs of acquisition, including $655 paid after closing 755 ---------- Total cost of acquisition $ 88,884 ========== The purchase price was allocated to the fair value of the assets acquired and liabilities assumed as follows: Accounts receivable $ 3,130 Deferred tax asset 7,000 K-mart licensing contract 1,100 Joe Boxer Tradename 77,654 ---------- Total allocated purchase price $ 88,884 ========== Financing for the acquisition was accomplished through the private placement by a subsidiary of the Company of $63.0 million aggregate principal amount of 8.45% asset backed notes, $17.5 million of which was used to refinance previously existing notes with the same lender, $40.0 million of which was paid to the sellers, approximately $1.0 of which was used to pay costs associated with the refinancing, approximately $0.3 million of which was place in a trust account as required by the lender, and approximately $4.0 of which was available to the Company for working capital purposes. Costs associated with the refinancing of approximately $1.0 million have been deferred and are being amortized over the 7 year life of the refinanced debt. (b) Represents the elimination of historical value of intangibles recorded in Joe Boxer of $11.9 million, elimination of Joe Boxer's assets and liabilities not acquired or assumed, and the elimination of the assumed K-Mart debt obligation already refected in entry (a) above. Assets not acquired which have been eliminated consist primarily of intercompany receivables($16.7 million) and leasehold improvements ($0.3 million), liabilities not assumed which have been eliminated consists primarily of accounts payable of $0.3 million, Notes to Unaudited Pro Forma Consolidated Statements of Operations: (c) Represents the amortization of acquired intangible assets (K-Mart contract) on a straight line basis over the remaining contract period of 2.5 years and the deferred financing fees incurred in closing the re-financing arrangement over the 7 year life of the refinanced debt. (d) Represents the interest expense at 8.45% of interest rate that would have been incurred under the terms of the refinancing incurred as part of the acquisition. (e) Represents the deferred income tax provision that would be recorded against the earnings generated from the acquired business. (f) Represents the shares of Iconix's common stock that were issued as part of the acquisition.
Unaudited Pro Forma Consolidated Balance Sheets (000's omitted, except par value) As of June 30 2005 Pro Forma Adjustment --------------------------------- ----------------------------- Pro Forma Iconix Joe Boxer Note A Note B Consolidated Assets Current Assets Cash............................................... $ 515 $ 3,741 $ 4,047 $ (3,741) $ 4,562 Accounts receivable, net........................... 3,982 145 3,132 (145) 7,114 Due from affiliate................................. 463 16,694 - (16,694) 463 Inventories........................................ - 24 - (24) - Deferred income taxes.............................. 3,349 - - - 3,349 Prepaid advertising and other...................... 297 152 - (152) 297 ------- ------- ------- ------- ------- Total Current Assets................................... 8,606 20,756 7,179 (20,756) 15,785 Property and equipment, at cost: Furniture, fixtures and equipment.................. 1,612 - - - 1,612 Leasehold improvement.............................. - 470 - (470) - Less: Accumulated depreciation and amortization.... 1,366 199 - (199) 1,366 ------- ------- ------- ------- ------- 246 271 - (271) 246 Other assets: Restricted cash.................................... 2,900 - 310 - 3,210 Goodwill........................................... 25,241 - - - 25,241 Intangibles, net................................... 16,121 11,864 78,754 (11864) 94,875 Deferred financing costs, net...................... 1,907 - 1,032 - 2,939 Deferred income taxes.............................. 2,073 - 7,000 - 9,073 Other.............................................. 1,142 - - - 1,142 ------- ------- ------- ------- ------- 49,384 11,864 87,096 (11,864) 136,480 ------- ------- ------- ------- ------- Total Assets........................................... $ 58,236 $ 32,891 94,275 (32,891) 152,511 ======= ======= ======= ======= ======= Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued expenses.............. $ 2,194 $ 183 $ 964 $ (183) $ 3,158 Accounts payable, subject to litigation............ 4,886 3,750 - (3,750) 4,886 Accrued interest, note payable..................... - 276 - (276) - Due to affiliated companies........................ - 51 - (51) - Due to related parties............................. 434 - - - 434 Current portion of deferred revenue............. 1,332 - - - 1,332 Current portion of long-term debt............... 3,024 3,509 4,856 (3,509) 7,880 ------- ------- ------- ------- ------- Total Current Liabilities.............................. 11,870 7,769 5,820 (7,769) 17,690 ------- ------- ------- ------- ------- Deferred revenue....................................... 183 - - - 183 Deferred rent.......................................... - 32 - (32) - Long-term debt......................................... 17,818 7,290 51,431 (7,290) 69,249 Stockholders' Equity Common stock, $.001 par value - shares authorized 75,000; shares issued 28,751 at June 30, 2005 and 28,293 issued at December 31, 2004.......................... 30 - 4 - 34 Additional paid-in capital......................... 76,962 5,000 37,020 (5,000) 113,982 Accumulated deficit................................ (47,960) 12,800 - (12,800) (47,960) Treasury stock - 198 shares at cost.................... (667) - - - (667) ------- ------- ------- ------- ------- Total Stockholders' Equity............................. 28,365 17,800 37,024 (17,800) 65,389 ------- ------- ------- ------- ------- Total Liabilities and Stockholders' Equity............. $ 58,236 $ 32,891 $ 94,275 $(32,891) $152,511 ======= ======= ======= ======= =======
Unaudited Pro Forma Consolidated Statements of Operations (000's omitted, except per share data)
Six Months Ended June 30, 2005 Pro Forma Pro Forma ------------------------------- Iconix Joe Boxer Adjustments Note Consolidated Licensing and commission revenue............... $ 8,587 $ 7,978 $ - $ 16,565 Operating expenses: Selling, general and administrative expenses.... 5,517 2,015 294 (c) 7,826 Special charges................................. 707 - - 707 ------------- ------------- ------------- -------------- Operating income................................ 2,363 5,963 (294) 8,032 Interest expense - net.......................... 845 290 1,744 (d) 2,879 ------------- ------------- ------------- -------------- Income before income taxes...................... 1,518 5,673 (2,038) 5,153 Income tax (benefits) provisions................ (1,780) - 1,000 (e) (780) ------------- ------------- ------------- -------------- Net income ..................................... $ 3,298 $ 5,673 $ (3,038) $ 5,933 ============= ============= ============= ============== Earnings per common share: Basic.................................. $ 0.12 $ 0.18 ============= ============== Diluted................................ $ 0.11 $ 0.17 ============= ============== Weighted average number of common shares outstanding: Basic.................................. 28,516 4,350 (f) 32,866 ============= ============= ============== Diluted................................ 30,115 4,350 (f) 34,465 ============= ============= ==============
Unaudited Pro Forma Consolidated Statements of Operations (000's omitted, except per share data)
Eleven Months Ended December 31, 2004 Pro Forma Pro Forma ------------------------------- Iconix Joe Boxer Adjustments Note Consolidated Net sales....................................... $ 60,409 $ - $ - $ 60,409 Licensing and commission revenue............... 8,571 20,058 - 28,629 ------------- ------------- ------------- -------------- Net Revenue..................................... 68,980 20,058 - 89,038 Cost of goods sold, net of recoveries pursuant to an agreement of $7,566 for Iconix)... 48,229 - - 48,229 ------------- ------------- ------------- -------------- Gross profit.................................... 20,751 20,058 - 40,809 Operating expenses: Selling, general and administrative expenses.... 17,720 8,007 587 (c) 26,314 Special charges................................. 295 - - 295 ------------- ------------- ------------- -------------- Operating income................................ 2,736 12,051 (587) 14,199 Interest expense - net.......................... 2,495 544 3,296 (d) 6,335 ------------- ------------- ------------- -------------- Income before income taxes...................... 241 11,507 (3,883) 7,864 Income tax provisions........................... - - 1,900 (e) 1,900 ------------- ------------- ------------- -------------- Net income ..................................... $ 241 $ 11,507 $ (5,783) $ 5,964 ============= ============= ============= ============== Earnings per common share: Basic.................................. $ 0.01 $ 0.19 ============= ============== Diluted................................ $ 0.01 $ 0.18 ============= ============== Weighted average number of common shares outstanding: Basic.................................. 26,851 4,350 (f) 30,201 ============= ============= ============== Diluted................................ 28,706 4,350 (f) 33,056 ============= ============= ==============