EX-99.4 6 ex994.txt PRO FORMA 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"), and the acquisition in September 2005 of Rampage brand from Rampage Licensing, LLC, a California limited liability company ("Rampage"), 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 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 for any future period. Unaudited pro forma consolidated financial statements giving effect to the Joe Boxer acquisition only were previously filed in Iconix's Form 8-K/A filed on October 7, 2005. Under the purchase method of accounting, tangible and identifiable intangible assets acquired and liabilities assumed are recorded at their estimated fair values. 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. The Joe Boxer and Rampage trademarks have been determined to have an indefinite useful life, and accordingly, in accordance with FAS 142, no amortization will be recorded in Iconix's consolidated statements of operations. Instead, the trademarks will be tested for impairment at least annually, with any related impairment charge recorded to the statement of operations at the time of determining such impairment. The pro forma condensed balance sheet assumes that these acquisitions 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 the historical operating results of Iconix and the historical statements of operations of Joe Boxer and Rampage for the same periods, giving effect to the acquisition as though it had occurred at the beginning of each period. The consolidated historical financial information of Iconix 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 information of Rampage for the year ended December 31, 2004 is derived from its audited financial information included herein and the historical financial statements for the six months ended June 30, 2005 are derived from their unaudited financial statements included herein. The historical financial information of Joe Boxer are derived from its historical financial statements previously filed by Iconix. Notes to Unaudited Pro Forma Consolidated Balance Sheet: (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. 1 Total purchase price was determined as follows: (000's omitted) 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 10,798 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 $ 88,886 ========== The purchase price was allocated to the fair value of the assets acquired and liabilities assumed as follows: (000's omitted) Accounts receivable $ 3,121 Deferred tax asset 2,700 K-mart licensing contract 1,333 Joe Boxer Trademark 79,800 Goodwill 1,932 ---------- Total allocated purchase price $ 88,886 ========== Financing for the JOE BOXER(R) acquisition was accomplished through the private placement by a subsidiary of Iconix, 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 million of which was used to pay costs associated with the refinancing, approximately $0.3 million of which was placed in a trust account as required by the lender, and approximately $4.0 million of which was available to Iconix 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, and the elimination of the acquired liabilities already reflected in the purchase accounting adjustment (See Note (a) above). (C) Reflects the allocation of cost associated with the purchase of Rampage'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. 2 Total purchase price was determined as follows; (000's omitted) Cash paid at closing $ 25,750 Fair value of 2,171,336 shares of common stock at $9.28 per share 20,150 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 $ 47,443 ======== The purchase price was allocated to the fair value of the assets acquired as follows: (000's omitted) Rampage licensing contract $ 550 Rampage domain name 230 Rampage non-compete agreement 600 Rampage trademark 41,070 Goodwill 4,993 -------- Total allocated purchase price $ 47,443 ======== Financing for the Rampage acquisition was accomplished through the private placement by IP Holdings, LLC ("IPH"), a subsidiary of Iconix, of $103.0 million aggregate principal amount of asset backed notes, $63.0 million of which was used to refinance the previously existing notes with the same lender (discussed above under note (a)), $25.75 million of which was paid to the sellers, approximately $773,500 of which was used to pay costs associated with the refinancing, approximately $1.4 million of which was placed in a trust account as required by the lender, and $12 million was deposited in an escrow account for the benefit of the holders of the note, to be used by IPH only for the purchase of additional intellectual property assets from Iconix. To the extent such purchase did not occur prior to November 15, 2005, IPH must redeem a portion of the note worth $12 million on deposit in such escrow account with no penalty. On November 22, 2005, IPH redeemed $12 million of the note as such purchase did not occur prior to November 15, 2005. Therefore, interest thereon was not computed in the pro forma statements of operations for the period ended June 30, 2005 ad the 12 months ended December 31, 2004 as the amount would not have been outstanding. Costs associated with the debt issuance of approximately $.8 million have been deferred and are being amortized over the 7-year life of the notes. (D) Represents the elimination of historical value of intangibles recorded in Rampage of $21.4 million, elimination of Rampage's assets and liabilities not acquired, including the elimination of due to related parties and interest thereon. Notes to Unaudited Pro Forma Consolidated Statements of Operations: (E) Represents the amortization of acquired Joe Boxer 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 same 7 year life of the refinanced debt. 3 (F) Represents the incremental interest expense at 8.45% of interest rate that would have been incurred under the terms of the refinancing incurred as part of the Joe Boxer acquisition. (G) Represents the deferred income tax provision that would be recorded against the earnings generated from the acquired Joe Boxer business. (H) Represents the shares of Iconix's common stock that were issued as part of the Joe Boxer acquisition. (I) Represents the amortization of acquired Rampage licensing contracts of $550,000, Rampage domain name of $230,000 and Non-compete agreement, on a straight line basis over the remaining contract period of 3, 5, and 2 years, respectively, as well as the deferred financing fees incurred in closing the Rampage re-financing arrangement have over the same 7 year life of the refinanced debt. (J) Represents the interest expense at 8.1% of interest rate that would have been incurred under the terms of the refinancing incurred as part if the Rampage acquisition, net of interest expenses that would have been eliminated on the long term liabilities not acquired. (K) Represents the shares of Iconix's common stock that were issued as part of the Rampage acquisition. 4 Unaudited Pro Forma Consolidated Balance Sheet ('000 omitted, except per share information)
Pro Forma Pro Forma As of 6/30/05 Adjustment As of 6/30/05 Adjustment Pro Forma Iconix Joe Boxer Note A Note B Rampage Note C Note D Consolidated -------- --------- -------- -------- ------------- ------- ------- ------------ Assets Current assets Cash 515 3,741 4,047 (3,741) 36 (23) (36) 4,539 Restricted-use cash - - - - - 12,000 - 12,000 Accounts receivable, net 3,982 145 3,121 (145) 1,036 - (1,036) 7,103 Due from factors, net - 16,694 - (16,694) - - - - Due from affiliate 463 - - - - - - 463 Inventories - 24 - (24) - - - - Deferred income taxes 3,349 - - - - - - 3,349 Prepaid advertising and other 297 77 - (77) 185 - (185) 297 Other receivables - 75 - (75) - - - - -------- --------- -------- -------- ------------- ------- ------- ------------ Total current assets 8,606 20,756 7,168 (20,756) 1,257 11,977 (1,257) 27,751 Property and equipment at cost: Furniture, fixtures and equipment 1,612 - - - - - - 1,612 Leasehold improvements - 470 - (470) - - - - Less: accum. Depr. And amort. (1,366) (199) - 199 - - - (1,366) -------- --------- -------- -------- ------------- ------- ------- ------------ 246 271 - (271) - - - 246 Other assets: Restricted cash 2,900 - 310 - - 1,400 - 4,610 Goodwill 25,241 - 1,932 - - 4,993 - 32,166 Intangibles, net 16,121 11,864 81,133 (11,864) 21,364 42,450 (21,364) 139,704 Deferred financing costs, net 1,907 - 1,032 - - 773 - 3,712 Deferred income taxes 2,073 - 2,700 - - - - 4,773 Other 1,142 - - - - - - 1,142 -------- --------- -------- -------- ------------- ------- ------- ------------ 49,384 11,864 87,107 (11,864) 21,364 49,616 (21,364) 186,107 -------- --------- -------- -------- ------------- ------- ------- ------------ Total assets 58,236 32,891 94,275 (32,891) 22,621 61,593 (22,621) 214,104 ======== ========= ======== ======== ============= ======= ======= ============ Liabilities and stockholders equity Current liabilities: Accounts payable and accrued expenses 2,194 183 964 (183) 562 655 (562) 3,813 Accounts payable, subject to litigation 4,886 3,750 (3,750) - - - 4,886 Accrured interest, note payable 276 (276) - - - - Due to affiliated companies 51 (51) - - - - Due to related parties 434 - - 4,988 - (4,988) 434 Debt to be repaid with restricted-use cash 12,000 12,000 Current portion of deffered revenue 1,332 - - - - - 1,332 Current portion of long term debt 3,024 3,509 4,856 (3,509) - 2,708 - 10,588 -------- --------- -------- -------- ------------- ------- ------- ------------ Total current liabilities 11,870 7,769 5,820 (7,769) 5,550 15,363 (5,550) 33,053 Deferred revenue 183 - - - - - - 183 Deferred rent 32 - (32) - - - - Long term debt 17,818 7,290 51,431 (7,290) 17,008 25,292 (17,008) 94,541 Stockholders' equity: Common stock 30 - 4 - - 2 - 36 Additional paid-in capital 76,962 5,000 37,020 (5,000) 63 20,936 (63) 134,918 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) 63 20,938 (63) 86,327 -------- --------- -------- -------- ------------- ------- ------- ------------ Total liabilities and stockholders' equity 58,236 32,891 94,275 (32,891) 22,621 61,593 (22,621) 214,104 ======== ========= ======== ======== ============= ======= ======= ============ See accompanying introduction and notes to unaudited pro forma consolidated financial statements. 5
Unaudited Pro Forma Consolidated Statement of Operations ('000 omitted, except per share information)
For the period For the period Ended 6/30/05 Ended 6/30/05 Iconix Joe Boxer Pro Forma Rampage Pro Forma Pro Forma Historical Historical Adjustment Historical Adjustment Consolidated ---------- ---------- ---------- ------------- ---------- ------------ Licensing income 8,587 7,978 3,899 - 20,464 ---------- ---------- ---------- ------------- ---------- ------------ Gross profit 8,587 7,978 3,899 - 20,464 Selling, general & administrative expenses 5,517 2,015 340(e) 1,542 320(i) 9,734 Special charges 707 - - - 707 ---------- ---------- ---------- ------------- ---------- ------------ Operating income 2,363 5,963 (340) 2,357 (320) 10,023 Other expense (income): Interest expense - net 845 290 1,744(f) 684 317(j) 3,880 ---------- ---------- ---------- ------------- ---------- ------------ Income before income taxes 1,518 5,673 (2,084) 1,673 (637) 6,143 Income taxes (benefits) provisions (1,780) - 1,000(g) - - (780) ---------- ---------- ---------- ------------- ---------- ------------ Net income (loss) 3,298 5,673 (3,084) 1,673 (637) 6,923 ========== ========== ========== ============= ========== ============ Earnings (Loss) per share Basic 0.12 0.20 ========== ============ Diluted 0.11 0.19 ========== ============ Weighted average number of common shares outstanding: Basic 28,516 4,350(h) 2,171(k) 35,037 ========== ========== ========== ============ Diluted 30,115 4,350(h) 2,171(k) 36,636 ========== ========== ========== ============ See accompanying introduction and notes to unaudited pro forma consolidated financial statements. 6
Unaudited Pro Forma Consolidated Statement of Operations ('000 omitted, except per share information)
11-month 12-month 12-month Ended Ended Ended 12/31/04 12/31/04 Pro Forma 12/31/04 Pro Forma Pro Forma Iconix Joe Boxer Adjustment Rampage Adjustment Consolidated ---------- ----------- ---------- ------------- ---------- ------------ Sales 60,409 - - - 60,409 Licensing income 8,571 20,058 6,422 - 35,051 ---------- ---------- ---------- ------------- ---------- ------------ Net revenue 68,980 20,058 6,422 - 95,460 Gost of goods soldSales 48,229 - - - 48,229 ---------- ---------- ---------- ------------- ---------- ------------ Gross profit 20,751 20,058 6,422 - 47,231 Selling, general & administrative expenses 17,720 8,007 681(e) 2,793 640(i) 29,841 Special charges 295 - - - 295 ---------- ---------- ---------- ------------- ---------- ------------ Operating income 2,736 12,051 (681) 3,629 (640) 17,095 Other expense (income): Interest expense - net 2,495 544 3,296(f) 658 1,397(j) 8,390 ---------- ---------- ---------- ------------- ---------- ------------ Income before income taxes 241 11,507 (3,977) 2,971 (2,037) 8,705 Income taxes (benefits) provisions - - 1,900(g) 13 - 1,913 ---------- ---------- ---------- ------------- ---------- ------------ Net income (loss) 241 11,507 (5,877) 2,958 (2,037) 6,792 ========== ========== ========== ============= ========== ============ Earnings (Loss) per share Basic 0.01 0.21 ========== ============ Diluted 0.01 0.20 ========== ============ Weighted average number of common shares outstanding: Basic 26,851 4,350(h) 2,171(k) 33,372 ========== ========== ========== ============ Diluted 28,706 4,350(h) 2,171(k) 35,227 ========== ========== ========== ============ See accompanying introduction and notes to unaudited pro forma consolidated financial statements. 7